• The EUR/GBP made a late-week break for the 0.87 handle.
• The Pound Sterling continues to give up ground after a dovish BoE shrank from rate hikes,
• EU PMI figures came in mixed, keeping Euro gains restrained.

The EUR/GBP stretched for the 0.8700 major handle in Friday trading, closing the week with over a full percent of upside gains with the Euro (EUR) seeing its best trading week against the Pound Sterling (GBP) since early February.

BoE balks on rate hike, EU Manufacturing PMI misses the mark

The Bank of England (BoE) pulled back from a broadly-anticipated rate hike this Thursday after inflation figures for the UK economy came in broadly lower than expected. The UK central bank is seeing inflation fall away faster than previously expected, and the BoE is set to see a "none and done" end to the rate hike cycle.

Eurozone Purchasing Manager Index (PMI) figures came in mixed early Friday, with the headline Composite PMI for September printing at 47.1, reversing the forecast decline 46.5 and climbing further from the previous period's 46.7.

The underlying components were less positive, leaving the Euro with limited upside following the release.

The EU Services PMI printed at 48.4, well above the forecast 47.7 and improving from the previous 47.9.

The Manufacturing component flubbed market forecasts, printing a disappointing 43.4, ticking down from the previous 43.5 and entire missing the market's expected improvement to 44.0.

Read more:

BoE holds interest rate steady at 5.25% in split vote

Eurozone Preliminary Manufacturing PMI unexpectedly falls to 43.4 in September vs. 44.0 expected

Next week is particularly anemic for both the Euro and the Pound Sterling, though next Friday will be seeing Gross Domestic Product (GDP) figures for the UK, to be closely followed by Consumer Index Price (CPI) numbers for the Eurozone.

EUR/GBP technical outlook

The EUR/GBP managed to etch in another gainer week, coming within sight of the 200-day Simple Moving Average (SMA) currently treading water near 0.8720.

The pair has accelerated cleanly through the descending trendline from July's swing high into the 0.8700 handle, and continued buying pressure will see the pair mount the psychological level and stage further gains.

On the downside, immediate technical support is coming from the 100-day SMA, currently turning bullish from 0.8600, and the bottom of recent consolidation is sitting further below near 0.8520.

EUR/GBP daily chart

EUR/GBP technical levels

• S&P 500 concluded the week at 4,320.06, marking a 0.23% daily and a 3.02% weekly drop, reaching levels last seen in June, with Nasdaq and Dow Jones also incurring losses
• Federal Reserve’s decision to hold rates but revise upward projections for the Federal Funds rate for 2023 and 2024 spurred a sharp reaction in financial markets.
• Sector-wise, Technology and Energy emerged as gainers, while Consumer Discretionary, Financials, and Real Estate were the laggards.

Wall Street finished the week on a lower note, mixed with the S&P 500, the Nasdaq, and the Dow Jones printing losses. Additionally, US equities plunged, led by the S&P 500 dropping to levels last seen in June.

S&P 500 plunges weekly, Nasdaq and Dow follow suit, as markets react to Federal Reserve’s upward revision of Federal Funds Rate projections

The S&P finished Friday’s session at 4,320.06, dropping 0.23%, but plunged -3.02% weekly. The heavy-tech Nasdaq edged lower by a minimal 0.09% and sank 3.21% weekly, while the Dow Jones Industrial dived 0.31% at 33,963.84 and slumped -1.89% in the week.

Sector-wise, the biggest gainers were Technology and Energy, each gained 0.26% and 0.15%. The laggards were Consumer Discretionary, Financials, and Real Estate, erasing from its value 0.87%, 0.74%, and 0.72%, respectively.

During the week, the Federal Reserve held the sixth monetary policy meeting, in which the US central bank decided to hold rates but upward revised their projections to the Federal Funds rate (FFR). For 2023, policymakers expect the FFR to end at 5.60%; for 2024, they increased their estimates from 4.6% to 5.1%.

The data spurred an aggressive reaction in the financial markets, with US equities plummeting sharply after hitting fresh weekly highs. US Treasury bond yields touched 16-year highs, led by 2s, 5s and 10s. Nevertheless, as traders booked profits before the weekend, US bond yields retraced, though they failed to undermine the Greenback.

Data-wise, S&P Global announced the final PMI readings in the United States (US). Manufacturing PMI improved to 48.9 but stood at recessionary territory. Contrarily, Services and Composite PMI showed signs of losing steam, though it expanded but continued to aim towards the 50 expansion/contraction threshold.

US Treasury bond yields finished the session with the 10-year benchmark note rate at 4.36%, lost 1.33%. The Greenback, as shown by the US Dollar Index, ended positively, climbing 0.19% to 105.58.

WTI rose by 0.85% daily in the commodity space underpinned by tight supply concerns stemming from Russia’s fuel export ban.

S&P 500 Price Action – Daily Chart

S&P 500 Technical Levels

• The USD/CAD is recovering for Friday after slipping to 1.3425.
• Rising oil prices are bolstering the CAD, but the USD has been finding market support.
• Canadian Retail Sales rose for July, but slightly less than expected, reducing CAD upside.

The USD/CAD is set to finish out Friday near where it started, trading just south of 1.3490.

The Loonie (CAD) has twisted through the back half of the trading week, with the CAD and (Greenback) playing tug-of-war.

Rising oil prices have been boosting the CAD lately, but a break in crude gains sees the USD/CAD testing back into recovery territory.

Canadian Retail Sales rose 0.3% in July, slightly below market expectations of 0.4% but an improvement on the previous month's -0.7%, which was revised upwards from -0.8%.

Core Retail Sales (retail sales figures less automobiles) rose 1% for the same period, breezing past analyst forecasts of 0.5%.

On the US side, Purchasing Manager Index (PMI) figures came in mixed, seeing a brief slip in the US Dollar but capping off the potential for a determined move in either direction for the USD.

The preliminary US S&P Global Manufacturing PMI for September climbed to 48.9 against the expected 48, easily clearing expectations. The Services PMI component slipped analyst forecasts, dipping to 50.2 and reversing the expected improvement to 50.6.

Read more: 

US S&P Global Manufacturing PMI improves to 48.9, Services PMI declines to 50.2 in September

The economic calendar is on the thin side for next week, but investors will be keeping one eye out for US Durable Goods Orders next Wednesday. Markets are expecting durable goods orders for August to print at -0.4%, a declining figure but still an improvement from the previous period's 5.2% decline.

USD/CAD technical outlook

The USD/CAD is trying to recover from near-term lows into 1.3380, and is seeing the 200-hour Simple Moving Average (SMA), currently capping off intraday action from 1.3500.

The pair is 1.6% down from September's peak just below the 1.3700 handle.

Daily candlesticks sees the USD/CAD stuck into the 200-day SMA, and market sentiment could flow in either direction moving forward.

USD/CAD daily chart

USD/CAD technical levels

• USD/CHF is on a bullish trajectory, ending the week with over 1% gains,
• Pair is eyeing the 0.9100 mark, with a breach potentially exposing the May 31 cycle high at 0.9147, following a rally to the March 16 daily high at 0.9340.
• Key support levels for sellers include the 200-DMA and the 0.9000 mark; breaching these could lead to a test of the September 20 daily low at 0.8931.

USD/CHF is set to end the week with decent gains of more than 1%, while breaking above the 200-day moving average (DMA), which could open the door for further upside, with buyers eyeing a new cycle high. Therefore, the pair is trading at 0.9071, edges up 0.30% late in the New York session.

The daily chart portrays the pair extending its gain past the 0.9032 (200-DMA), and puts a challenge of the 0.9100 figure into play. A breach of the latter will expose the May 31 cycle high at 0.9147, which, if cleared, the USD/CHF could rally back to the March 16 daily high at 0.9340.

Conversely, sellers would face the 200-DMA and the 0.9000 mark. Those two levels hurdled, and the USD/CHF would dive and test the September 20 daily low of 0.8931 before testing the 0.8900 figure.

USD/CHF Price Action – Daily chart

USD/CHF Key Technical levels

• The GBP/USD tumbled on a dovish BoE on Thursday.
• Mixed PMIs for the US saw the USD take a step back, but Pound Sterling traders couldn't capitalize.
• UK Retail Sales missed the mark, keeping the GBP in a bearish stance.

The GBP/USD is looking for further downside to end the trading week, probing chart space below 1.2250 heading into the final hours of Friday's trading session.

The UK's Bank of England (BoE) came in dovish this week after British inflation came in much lower than previously anticipated. The BoE held its benchmark rate at 5.25%, waffling on a market-expected 25-basis-point increase to 5.5%.

UK Retail Sales on Friday missed expectations, printing at 0.4%. The figure rebounded from the previous reading of -1.1%, but failed to capture the market forecast of 0.5%.

UK Purchasing Manager Index (PMI) figures mixed towards the downside, capping any upside potential for the Pound Sterling (GBP).

The preliminary UK S&P Global/CIPS Composite PMI for September declined to 46.8, missing the expected increase to 48.7. The previous month's PMI came in at 48.6.

The manufacturing component of the UK PMI came in better than expected at 48.9 versus the forecast 48.0, but the services sector PMI declined to 47.2 compared to the forecast 49.2.

On the US side, PMIs also came in mixed. The composite ticked lower to 50.1 from 50.2. The manufacturing PMI jumped to 48.9 from the previous 47.9, while the services component slipped to 50.2 from 50.5 and walking back the expected uptick to 50.6.

Read more:

BoE holds interest rate steady at 5.25% in split vote

UK Preliminary Services PMI declines to 47.2 in September vs. 49.5 expected

US S&P Global Manufacturing PMI improves to 48.9, Services PMI declines to 50.2 in September

GBP/USD technical outlook

The Pound Sterling continues to struggle against the US Dollar, with the GBP/USD down almost 1.5% from the week's high near 1.2425.

The pair briefly pierced the 100-hour Simple Moving Average (SMA) on Wednesday but has fallen to the downside, now trading beneath the 34-hour Exponential Moving Average (EMA) currently drifting to the low side of 1.2280.

Daily candlesticks have the GBP/USD piercing the 200-day SMA just above 1.2400, and continued downside will see the pair set to challenge six-month lows, with little technical support between current prices and 2023's lows near 1.1825.

GBP/USD daily chart

GBP/USD technical levels

• Gold prices see a recovery, achieving gains of 0.25%, driven by a reversal in US bond yields, with the 10-year note coupon dropping from a 16-year high of 4.51% to 4.44%.
• Federal Reserve officials express a cautious stance, emphasizing the need for patience despite the necessity for further rate hikes to control inflation.
• The US Dollar Index (DXY) continues to print modest gains, sitting at 105.56, potentially impacting gold’s rally, with
• Next week, US data includes Consumer Confidence, Durable Goods Orders, and Initial Jobless Claims to provide further direction.

Gold price recovers some ground after hitting a weekly low of $1913.99, though it remains shy of breaking solid resistance at around the 50-day moving average (DMA) at $1929.79. Factors like dropping US T-bond yields and an upbeat market sentiment drive XAU/USD’s price toward the current spot at $1924.56, achieving gains of 0.25%.

Gold price nudges upwards despite a firm US Dollar

XAU/USD prices is being driven up by the reversal in US bond yields. The US 10-year benchmark note coupon reversed from a 16-year high of 4.51% towards 4.44%. Consequently, US real yields are edging lower from five basis points from 2.11% to 2.06%.

In the meantime, Federal Reserve officials had turned cautiously, led by Boston and San Francisco Fed Presidents Susan Collins and Mary Daly, stressing that although inflation is cooling down and further rate hikes would be needed, the Fed must be patient. Fed Governor Michelle Bowman commented that more increases are needed to control inflation.

Data-wise, S&P Global announced the final PMI readings in the United States (US). Manufacturing PMI improved to 48.9 but stood at recessionary territory. Contrarily, Services and Composite PMI showed signs of losing steam, though it expanded but continued to aim towards the 50 expansion/contraction threshold.

Meanwhile, the US Dollar Index prints modest gains of 0.17%, stalling Gold’s rally. The DXY sits at 105.56, set to print solid gains for the tenth straight week.

On the US front, Consumer Confidence, Durable Goods Orders, Initial Jobless Claims, and the Fed’s preferred gauge for inflation the core PCE.

XAU/USD Price Analysis: Technical outlook

From a technical standpoint, the XAU/USD is set to continue to trade sideways, within the $1913-$1948 range, with most daily moving averages (DMAs) hovering around the current exchange rate. However, as the yellow metal remains below the 200-DMA, which sits at $1926.24, the path of least resistance is tilted to the downside. First support would be the September 21 low of $1913.99, followed by the September 14 $1901.11 swing low. Conversely if the non-yielding metal surpass the 100-DMA at $1941.86, a challenge of the $1950 mark is expected.

• GBP/JPY trading into the 181.50 handle, on the low side for the week.
• The Pound Sterling lost ground across the board this week after a dovish twist from the BoE.
• The BoJ continues to maintain their easy monetary policy stance.

The GBP/JPY is ticking into the south side of the 181.50 handle after the Pound Sterling (GBP) failed to recover any meaningful ground from Thursday's backslide. The Guppy is down almost a full percentage point this week.

The Bank of England (BoE) struck a notably dovish tone this Thursday, standing pat on its benchmark interest rate after inflation data for the UK came in much softer than expected earlier this week. The BoE is holding its reference rate at 5.25% for the time being, and it's increasingly looking like a 'none and done' scenario for the UK's rate hike cycle.

The Bank of Japan (BoJ) also held its main policy rate, maintaining a negative rate regime at -0.1%. The BoJ is keeping steady on its hyper-easy monetary policy mechanisms, and the BoJ is determined to try and keep Japanese inflation up above the 2% mark.

Japanese inflation is currently riding on the high end of policymakers' target level, but Japanese inflation is broadly expected to plummet in the coming months, and the BoJ is not in a rush to start reversing their negative rate policy until the central bank is assured that inflation will remain above their minimum target.

Read more:

BoE holds interest rate steady at 5.25% in split vote

BoJ’s Ueda: Could consider policy change when achievement of 2% inflation is in sight

The economic calendar for the upcoming week is looking sparsely-populated through the first half of the week, and the only notable release on the data docket will be the BoJ's meeting minutes on Tuesday, which will reveal the Japanese central bank's inner monologue on the interest rate decision that just passed.

GBP/JPY technical outlook

The GBP/JPY failed to hold onto rebound gains, etching in a high of 182.30 on Friday before settling lower, looking to establish a break of 181.50 to close out the week's trading session.

The pair remains firmly bearish below the 200-hour Simple Moving Average (SMA) which is currently pricing in resistance from 183.00.

Daily candlesticks see the Guppy waffling towards the 100-day SMA near the 180.00 major handle, and the pair is down almost 3% from August's peak near 186.70.

Investors will be keeping an eye out for a sustained bearish push into the 100-day SMA, where a recovery rally could see a rebound back into the 34-day Exponential Moving Average that is currently capping off upside potential and sitting just north of near-term highs near 183.30.

GBP/JPY daily chart

GBP/JPY technical levels

• AUD/USD is up 0.51%, benefiting from the overall weakness of US Dollar.
• Despite hawkish remarks from various Fed officials, the US Dollar remains subdued, with the DXY showing modest gains at 105.55.
• Solid PMIs in Australia and considerations of rate hikes by the RBA support the AUD.
• Key economic data scheduled for release next week, including Consumer Price Index and Retail Sales for Australia, and Consumer Confidence and Durable Goods Orders for the US.

The Australian Dollar (AUD) stages a comeback versus the Greenback (USD) on Friday, and it remains set to finish the week with decent gains. Overall US Dollar weakness, along with investors seeking risk, and dropping US Treasury bond yields, are the reasons behind the buck’s reaction. Hence, the AUD/USD is posting gains of 0.51%, trading at 0.6448 once the pair bounced off the 0.6403 low.

Aussie Dollar gains traction as business activity in the US takes a hit, US bond yields retreat

S&P Global revealed that business activity in the United States (US) remains subdued, failing to gather momentum, instead decelerating. Manufacturing PMI, despite improvement, remained below the 50 threshold that divides expansion from contraction, while the Services and Composite PMIs, clung to expansionary territory, despite printing lower readings compared to August.

Aside from this, Federal Reserve officials remained hawkish, led by Fed Governor Michell Bowman saying more rate hikes are needed, while Susan Collins called for patience. Recently, San Francisco Fed President Mary Daly noted that the gradual rebalancing of labor market data is good news, but more is needed to determine further policy tightening. She echoed Collins's words that “Patience is a good strategy.”

That said, the Greenback continues to print modest gains as shown by the US Dollar Index (DXY) at 105.55, gains 0.16%. Nevertheless, traders booking profits seem the reason behind the AUD/USD’s strength, alongside the recent economic data revealed on the Aussie’s side.

PMIs in Australia were solid, showing a slight improvement compared to August PPMIs, particularly the Composite one. The Index rose by 50.2, crushing estimates of 47, boosted by the jump in the Services segment, while manufacturing activity continued to deteriorate. That alongside the Reserve Bank of Australia’s (RBA) monetary policy minutes showed the central bank considered hiking rates in September, cushioned the AUD/USD pair's fall, past the current week’s low of 0.6385.

For the next week, tier 1 data would feature on the Australia side the Consumer Price Index (CPI) monthly, Retail Sales, and Housing Credit. On the US front, Consumer Confidence, Durable Goods Orders, Initial Jobless Claims, and the Fed’s preferred gauge for inflation, the core PCE.

AUD/USD Price Analysis: Technical outlook

The AUD/USD remains consolidated at around the year's lows, unable to record a new cycle high, which could trigger a rally. However, a triple-bottom chart pattern is emerging, suggesting that further upside is expected. If the pair crosses the confluence of the 50-day moving average (DMA) and the latest swing high of August 30 at 0.6522, that could confirm its validity. The next resistance would be the 0.6600 figure, followed by the 200-DMA and the triple-top objective at 0.6695. Conversely, if price action remains subdued and drops below 0.6400, a re-test of the YTD low at 0.6357 is on the cards.

Next week, markets will continue to digest the outcomes of recent central bank meetings. Additionally, market participants will closely monitor the release of economic data, with a particular focus on inflation figures from the Eurozone and the US Core Personal Consumption Expenditure (PCE) index.

Here is what you need to know for next week: 

The US Dollar Index recorded its tenth consecutive weekly gain, ending around 105.50. The DXY continues to trend upward, supported by US economic data and the recent Federal Reserve (Fed) meeting.

During the FOMC meeting, interest rates were left unchanged in the range of 5.25% to 5.50%. In terms of macroeconomic projections, most members still see the possibility of further rate hikes later this year. Economic data in the US showed mixed results, with housing data coming in weaker while Jobless Claims dropped to the lowest level since January.

Next week, the key focus in the US will be on Friday's release of the Fed's preferred measure of consumer inflation, the Core Personal Consumption Expenditure (PCE) Price Index. It is expected to show a decline from an annual rate of 4.2% to 3.9%. The third estimate of Q2 GDP will be released on Thursday.

The Japanese yen was among the worst-performing major currencies. The Bank of Japan (BoJ) left its monetary policy unchanged at the September meeting, with Governor Ueda stating that any change would only occur when the achievement of 2% inflation is in sight. Japan will release several economic indicators next Friday, including the Tokyo Consumer Price Index, Unemployment Rate, Industrial Production, Retail Sales, Consumer Confidence, and household spending for August. However, the focus will remain on the potential intervention from Japanese authorities to curb the yen's weakness. USD/JPY reached its highest level in decades above 148.00, supported by higher US yields and the BoJ's policy stance.

The British Pound lagged following the Bank of England's decision to keep interest rates unchanged after a slowdown in inflation in August. Next Friday, the UK will release a new estimate of Q2 GDP growth. GBP/USD declined for the third consecutive week, reaching its lowest level since March at 1.2232, before closing around 1.2260. The pair has strong support around 1.2200. EUR/GBP surged from below 0.8600 to 0.8700, marking its biggest weekly gains since February.

EUR/USD finished the week near 1.0650 after hitting fresh monthly lows at 1.0614. The Eurozone PMI provided some relief with a rebound on Friday. Inflation data will be crucial next week, with Spain and Germany kicking off with CPI on Thursday, followed by France, Italy, and the Eurozone on Friday.

The Swiss franc lost ground against major currencies after the Swiss National Bank (SNB) left its key interest rate unchanged at 1.75%. The Swissy was also influenced by the dovish stance of the European Central Bank. USD/CHF accelerated to the upside, breaking decisively above 0.9000 to its highest level since June. EUR/CHF surged from around 0.9550 to 0.9660.

AUD/USD continued to trade within a range between 0.6500 and 0.6350. Australia will release the Monthly Consumer Price Index on Wednesday, with the annual rate expected to rebound from 4.9% in July to 5.2% in August. Retail sales data will be released on Thursday.

The New Zealand Dollar was the best-performing major currency during the week. NZD/USD gained almost 1%, rising to 0.5975 but was unable to reclaim the 0.6000 level.

On a volatile week for metals market, Gold ended the week flat around $1,925 after recovering ground on Friday. Silver remained above $23.00 and closed around $23.50.
 

• EUR/USD spends Friday trading into familiar territory.
• US PMIs kept the USD capped with a mixed print.
• USD on track to close out with weekly gains, but capped for the end of the week.

The EUR/USD is trading into neutral ground heading into the end of the trading week, testing well-trodded ground near the 1.0660 handle.

US Purchasing Manager Index (PMI) figures came in off-kilter, triggering a soft walkback for the Greenback (USD) during the Friday trading session, but keeping losses limited to intraday boundaries.

European PMI figures earlier on Friday saw the Euro (EUR) ease back after an unexpected drop, with the manufacturing component printing at 43.4 versus the forecast 44.0.

The US Manufacturing PMI printed above expectations at 48.9 for September, compared to 47.9 for August, but the Services PMI component fell back to 50.2, reversing the market forecast increase to 50.6.

Read more:

Eurozone Preliminary Manufacturing PMI unexpectedly falls to 43.4 in September vs. 44.0 expected

US S&P Global Manufacturing PMI improves to 48.9, Services PMI declines to 50.2 in September

EUR/USD corkscrews on PMIs that disappoint on both sides of the pond

The economic calendar looking forward is notably thin for the first half of next week, though traders will want to keep at least one eye on US Consumer Confidence on Tuesday, as well as Wednesday's Durable Goods Orders.

Market analysts see Durable Goods Orders for August slipping back only 0.4% after the previous reading of -5.2%.

EUR/USD technical outlook

The Euro has been cycling the 1.0660 level but has so far been unable to meaningfully mount the technical level, and is pacing familiar territory to close out the trading week.

The EUR/USD fell to a Friday low of 1.0615 but recovered to the top side near Friday's peak just north of 1.0670.

Hourly candles see the EUR/USD trading just south of the 200-hour Simple Moving Average (SMA) near 1.0685.

On the daily candlesticks, the Euro is decidedly bearish, continuing to decline through the 200-day SMA and down almost 5.5% from July's peak near 1.1275.

The 34-day Exponential Moving Average (EMA) is set to confirm a bearish cross of the 200-day SMA, and investors might be looking out for a relief rally to a major technical level before resuming another leg down.

EUR/USD daily chart

EUR/USD technical levels

Federal Reserve Bank of San Francisco President Mary C. Daly said on Friday that the Fed kept interest rates unchanged this week in recognition that “we are closer to our destination”. She added that inflation is coming down, and the labor market is gradually adjusting. 

Regarding interest rates, Daly mentioned that they do not know if they need to hold interest rates at their current level or introduce more monetary tightening. 

Market reaction 

The US Dollar Index is holding onto weekly gains, hovering around 105.45, after being unable to consolidate above 105.50. 
 

• WTI is strung up near $89.00/bbl after slipping off of recent highs.
• US crude barrels briefly saw $92.00 in the midweek on continuing supply concerns.
• Price pressures have eased heading into the weekend, but prices are set to continue rising.

West Texas Intermediary (WT) US crude oil is struggling to hold onto the $90.00 price level as Friday trading leaves crude oil barrels trading mostly flat for the day, briefly piercing the major handle before falling back to near where the day's trading began.

Crude oil prices are seeing strong support looking forward, with global supply set to leave oil demand chronically undersupplied for the near future. 

WTI US crude oil prices are up over 11% on the year, and have gained nearly 40% from the year's low at $64.31.

Market analysts broadly expect crude barrels to reach $100 in the future as global reserves of crude barrels dwindle away in what some experts calculate to be a 2 million bpd deficit in global production.

Ongoing production cuts to buoy crude prices towards the upside

Saudi Arabia and Russia have extended production cuts worth a combined 1.3 million bpd through the end of the year, bolstering prices across the globe and sending production facilities into a buying frenzy to eat up the expanded margins on oil accumulation, further constraining available supply.

WTI technical outlook

US crude oil has closed in the green for ten of the last twelve months. Daily candles see crude prices well above technical support, with the 200-day Simple Moving Average (SMA) near $77.00, well below current price action.

A rising trendline from late June's lows near $67.00 remains in place, and bullish momentum is currently running far away from the technical pattern.

The Relative Strength Index (RSI) and Moving Average Convergence-Divergence (MACD) indicators are both firmly planted in overbought territory, and it will take a significant profit-taking reversal to recover the indicator patterns.

WTI daily chart

WTI technical levels

• USD/MXN edges lower by 0.48% on positive market sentiment and a weakened US Dollar.
• Despite hawkish remarks from Fed officials, the US Dollar remains under pressure, with the DXY marking minimal gains at 105.45.
• Upcoming political developments and potential credit rating revisions in Mexico may affect the Peso's trajectory.

The emerging market currency the Mexican Peso (MXN) counterattacks the US Dollar (USD) after the exotic pair reached a weekly high of 17.2489, but it has trimmed those gains. At the time of writing, the USD/MXN changes hands at 17.1478, down 0.48%.

MXN strengthens to 17.1400ish on soft US Dollar due to a drop in US Treasury bond yields

Market sentiment remains positive, as shown by US equities trading with gains. Business activity in the United States (US) presented minuscule changes as revealed by S&P Global, with Manufacturing activity improving but standing in recessionary territory. Although expanded, the Services and Composite PMIs portrayed the country's economic slowdown.

Federal Reserve’s officials had been unleashed on the central bank space, led by the Boston Fed President Susan Collins. She suggested the possibility of further tightening while emphasizing the need for patience. Fed Governor Michell Bowman strongly determined that more rate hikes are necessary to control inflation.

Despite US central bank policymakers' hawkish rhetoric, the buck stands pressured. The US Dollar Index (DXY), which tracks the buck’s value vs. a basket of six currencies, prints minimal gains of 0.07%, at 10.45. Plunging US Treasury bond yields are a headwind for the USD/MXN, while also a tranche of upbeat Mexican data, supported the Peso.

Inflation in Mexico slowed down for the first half of September, hitting 4.44% YoY, down from 4.64% in August, below 4.46% forecasts. At the same time, the core Consumer Price Index rose 5.78%, above estimates of 5.76% YoY, but below August’s 6.21%. It should be said the Bank of Mexico (Banxico) held rates unchanged at 11.25% in the latest monetary policy meeting and emphasized the need to hold rates for a long period of time.

Given the backdrop, further USD/MXN downside is expected but capped around the 17.0000 figure.  Traders should know about political developments, as Mexico is headed for general elections. That, alongside the latest economic budget beginning to generate worries about a revision of the country’s credit rating, can weigh on the Mexican Peso.

USD/MXN Price Analysis: Technical outlook

Although the USD/MXN pair is set to finish the week with gains, price action has failed to achieve a new cycle high, with buyers eyeing the September 7 high at 17.7074. A breach of that level could open the door to test the 18.0000 figure, but it must reclaim the 100-day moving average (DMA) at 17.1888. On the downside, the pair’s fall is cushioned by the 50-DMA at 17.0302, before challenging 17.0000.

• The USD/JPY is seeing recovery on Friday into the top end of the week's trading.
• The BoJ maintained its negative rate policy regime, as markets broadly expected.
• US PMIs came in mixed, capping any decisive moves for the Greenback.

The USD/JPY is set to close out the trading week just south of the 148.50 level after peaking at an intraday high of 148.40 as the US Dollar (USD) covers its bids on a mixed Purchasing Manager Index (PMI) reading.

The Bank of Japan (BoJ) kept the bottom band of its main policy rate at -0.1% early on Friday, which shook off some bullish momentum for the Yen (JPY).

Read more:

BoJ’s Ueda: No change to way of policy decision making process

US S&P Global Manufacturing PMI improves to 48.9, Services PMI declines to 50.2 in September

Yen bulls found little love from the BoJ on Friday as the Japanese central bank reaffirmed its easy monetary policy stance until they see Japanese inflation maintaining 2% "in a stable manner". Inflation in the Japanese economy is on the high end for the time being, but price growth is expected to decline appreciably in the coming months, and the BoJ continues to be far off of a hawkish policy change.

US PMI figures came in somewhere in the middle, with manufacturing showing a minor improvement and services backsliding.

The US S&P Global Manufacturing PMI jumped further than expected, printing at 48.9 versus the expected 48, but the Services component missed to the downside, printing at 50.2 compared to the forecast 50.6. The mixed printing helped prop up the Greenback against the Yen, but kept gains restrained within the previous day's highs.

USD/JPY technical outlook

Thursday's backslide saw the USD/JPY fall to the 200-hour Simple Moving Average (SMA) before giving a rebound through early Friday trading.

The pair has gained steadily through the week, and is set to finish on the high end, currently looking for a foothold just beneath the week's peak of 148.46.

On the daily candlesticks the USD/JPY is decidedly bullish, up nearly 8% from July's bottom near 137.20. Bullish price momentum is seeing technical support from the 34-day Exponential Moving Average (EMA), and the US Dollar has gained over 13% against the Japanese Yen so far this year.

USD/JPY technical levels

• NZD/USD rebounds from a daily low of 0.5919 to 0.5977, driven by improved risk appetite and a softer US Dollar.
• Mixed US economic data and hawkish yet cautious remarks from Fed officials fail to bolster the Greenback, with the DXY slightly up at 105.47.
• Upcoming economic indicators, including Consumer Confidence and Core PCE in the US, and Business and Consumer Confidence in NZ, are in focus for the next week.

The New Zealand Dollar (NZD) stages a recovery against the US Dollar (USD) ahead of the weekend as investors' sentiment improved, while the Greenback is trading soft, undermined by a fall in US Treasury bond yields. The NZD/USD is trading at 0.5977 after bouncing from a daily low of 0.5919.

Kiwi recovers to 0.5977 as US Dollar weakens amid falling Treasury yields and mixed PMIs

Wall Street is trading in the green due to improved risk appetite. A report from S&P Global showed that business activity in the United States (US) was almost unchanged in September. The S&P Global Manufacturing PMI improved to 48.9 from 47.9 a month earlier, exceeding estimates but remained in contractionary territory, while the Services PMI dipped to 50.2 from 50.5 in July, below forecasts. The Composite reading, which offers a general view of business activity, was aligned with estimates at 50.1 but trailed August’s 50.2

Aside from this, US central bank officials had been unleashed, with Boston Fed President Susan Collins saying that further tightening is possible, though “patience” is required. Echoing some of her comments was Fed’s Governor Michell Bowman, who was more determined, saying that more rate hikes are needed to control inflation.

Although Fed officials' comments were hawkish, the Greenback failed to gain traction. The US Dollar Index (DXY), which measures the buck’s value against its peers, climbs just 0.09%, at 105.47, after dropping from 10578 high. US Treasury bond yields continued to weaken across the short and long end of the curve.

On the New Zealand (NZ) front, data revealed on Friday’s session that consumer confidence weakened in the third quarter regarding the economic outlook, with the index falling to 80.2 from 83.1. The agenda revealed the Trade Balance showed an improvement in the annual trade deficit to $15.54B for August $-1588B from prior figures.

For the next week, the economic agenda in the US would feature the Conference Board (CB) Consumer Confidence, Durable Good Orders, Initial Jobless Claims, and the Fed’s preferred gauge for inflation, the Core PCE. The docket would feature the Business and Consumer Confidence on the NZ front.

NZD/USD Price Analysis: Technical outlook

The pair bottomed out at around 0.5859, and since then, the NZD/USD has staged a comeback despite recent US Dollar strength. During the last three days, the currency pair has remained volatile, unable to get a clear direction, though it remains slightly tilted to the downside. However, further upside is expected if buyers lift the exchange rate past the September 1 swing high at 0.6015. Conversely, sellers must reclaim the September 21 low of 0.5895.

EUR/USD is approaching 1.06. Economists at Commerzbank analyze the pair’s outlook.

Interest rate cuts could become concretely apparent in the US

GBP dropped this week on the back of the BoE’s unchanged policy decision. Economists at Rabobank have revised down their six-month EUR/GBP forecast modestly.

Gloomy economic outlook for the Eurozone

Further interest rate increases will likely be appropriate, with inflation still being too high, Federal Reserve Governor Michelle Bowman said on Friday, per Reuters.

Key quotes

"Fed policy will need to be held at a restrictive level for some time to return inflation to 2% 'in a timely way."

"Continued risk of a further increase in energy prices could reverse some of the recent progress on lowering inflation."

"The economy is still growing at a solid pace, with robust consumer spending and solid job gains."

"Bank lending standards have tightened but there is no sign of a sharp contraction of credit that would significantly slow the economy."

"Expecting progress on inflation to be slow under current conditions, suggesting the need for even tighter policy."

Market reaction

These comments failed to trigger a noticeable market reaction and the US Dollar Index was last seen posting small daily losses at 105.36.

Economists at Crédit Agricole highlight uncertainties surrounding a potential US government shutdown and its implications for the USD. 

Some relief and support to the USD if a resolution to prevent the shutdown is reached before the deadline

Signs of stabilisation in China’s economy should provide some support to commodity markets. Nevertheless, the adjustment to a lower growth profile will ultimately cap the upside, strategists at ANZ Bank report.

Upside limitations

The price of a barrel of Brent Oil rose to a good $90 at the beginning of September. Strategists at Commerzbank analyze Oil’s outlook.

Limited upside potential for the price of Crude Oil in the short term

• Silver price turns back and forth after an upside move following the choppy US Dollar.
• The Fed delivered a hawkish commentary on interest rates and sees inflation getting controlled in 2026.
• S&P Global reported subdued preliminary PMIs for September.

Silver price (XAG/USD) turns sideways after a vertical upside move to near crucial resistance of $23.70 in the early New York session. The white metal struggles for a direction as the US Dollar Index (DXY) demonstrates a squeeze in volatility after an unchanged interest rate decision by the Federal Reserve (Fed) as expected.

The Fed delivered a hawkish commentary on interest rates and sees inflation getting controlled in 2026. Interest rates are expected to remain lofty long enough’ till the achievement of price stability.

S&P500 opened on a positive note on Friday, portraying some improvement in appeal for risk-sensitive currencies. While the broader bias is bearish as fears of a global slowdown are intact. The USD Index remains choppy despite the subdued preliminary PMI report for September, released by the S&P Global. The 10-year US Treasury yields rebounded sharply to

The Manufacturing PMI landed at 48.0 in line with expectations and slightly higher than the former reading of 47.9. The economic data has been contracting for a long period, a figure below 50.0 is itself considered a contraction in economic activities. The Services PMI, which tracks a sector that accounts for two-thirds of the US economy, dropped to 50.2 vs. expectations of 50.6 and the former release of 50.5.

Silver technical analysis

Silver price trades in a Rising Wedge chart pattern on a two-hour scale, in which pullbacks are considered buying opportunities by market participants till the volatility contraction. Upward-sloping 20-period Exponential Moving Average (EMA) at $23.48 indicates that the short-term trend is bullish.

The Relative Strength Index (RSI) (14) shifts into the bullish range of 60.00-80.00, which indicates that the bullish impulse has been triggered.

Silver two-hour chart

"I expect rates may have to stay higher, and for longer, than previous projections had suggested," Federal Reserve Bank of Boston President Susan Collins said on Friday and added that further tightening is certainly not off the table, per Reuters.

Key takeaways

"Optimistic inflation can fall with only a modest rise in unemployment."

"Current policymaking requires considerable patience to get the right signal from data."

"Inflation remains too high despite encouraging news from recent readings."

"Important aspects of inflation, like core services excluding shelter, have not yet shown a sustained improvement."

"Continued above-trend economic activity means it's too soon to be confident inflation is beaten."

Market reaction

The US Dollar Index lost its traction and declined below 105.50 in the American session, erasing its daily gains in the process.

Economists at TDS analyze the implications of interventions from Japan for the USD/JPY pair.

USD/JPY on a path towards 150

The Fed left key interest rates unchanged. The dot plot has a more hawkish tilt, economists at Société Générale report.

Option for hike retained through year-end

See: The Fed’s updated guidance should reinforce the USD’s upward momentum in the near-term – MUFG

• US private sector's business activity nearly stagnated in early September.
• US Dollar Index holds steady near 105.50 after PMI data.

S&P Global Manufacturing PMI improved to 48.9 in early September from 47.9 in August, pointing to an ongoing contraction in the manufacturing sector's business activity at a softening pace. The Services PMI edged lower to 50.2 from 50.5 in the same period and the Composite PMI arrived at 50.1, down slightly from 50.2 in August.

Commenting on PMI surveys' findings, “PMI data for September added to concerns regarding the trajectory of demand conditions in the US economy following interest rate hikes and elevated inflation," said Siân Jones, Principal Economist at S&P Global Market Intelligence.

"Although the overall Output Index remained above the 50.0 mark, it was only fractionally so, with a broad stagnation in total activity signalled for the second month running," Jones added and said that the service sector lost further momentum, with the contraction in new orders gaining speed. 

Market reaction

The US Dollar Index edged slightly lower after these data and was last seen gaining 0.1% on the day at 105.48.

Gold price yo-yoing after Fed meeting. Strategists at Commerzbank analyze the yellow metal’s outlook.

Longer-term-oriented ETF investors remain on the retreat 

The European Central Bank's (ECB) 4% policy rate has to be held sufficiently long, ECB Chief Economist Phillip Lane said on Friday and reiterated that the central bank is still very data-dependent.

Lane noted that the Euro area economy this year will be "fairly muted" and added that there are a lot of reasons for the economy to stagnate this year. 

Market reaction

These comments don't seem to be having a significant impact on the Euro's performance against its major rivals. As of writing, the EUR/USD pair was down 0.1% on the day at 1.0648.

What will happen if US inflation remains permanently lower than Eurozone inflation? Economists at Natixis see three main consequences.

US inflation likely to remain permanently lower than Euzone inflation

• EUR/USD clinches new six-month lows near 1.0610.
• Further decline opens the door to a drop to the 1.0515 zone.

EUR/USD keeps the negative price action well in place and retreats to fresh multi-month lows around 1.0615 on Friday.

If the pair breaches this level in the short-term horizon, it could then open the door to a potential retracement to the March low of 1.0516 (Mar 8), which is the last defence ahead of an assault on the 2023 low at 1.0481 (January 6).

While below the key 200-day SMA at 1.0828, the pair is likely to face extra weakness.

EUR/USD daily chart

"Based on the information available today and using a range of analytical tools, we can say that the interest rate level we have now reached, if maintained for a sufficiently long time, is broadly consistent with achieving our inflation target in the medium term," European Central Bank (ECB) policymaker Pablo Hernandez de Cos told Germany's Börsen-Zeitung on Friday, per Reuters.

He added that the underlying inflation in the Eurozone was now easing and said that it was too early to talk about interest rate cuts.

Market reaction

EUR/USD showed no immediate reaction to these comments and was last seen trading virtually unchanged on the day at 1.0655.

Mexico's central bank (Banxico) will meet next week to decide on its interest rate. Economists at Commerzbank analyze MXN outlook.

Banxico will maintain its hawkish stance

• USD/CAD discovers buying interest near 1.3430 after Canada’s Retail Sales excluding automobiles remained stronger.
• Consumer spending for automobiles remained weak as households avoided higher installment obligations.
• The US Dollar struggles to find a direction as investors remain mixed about the Fed’s interest rate peak.

The USD/CAD pair finds interim support near 1.3430 after Statistics Canada reported mixed Retail Sales report for July. Consumer spending expanded at a slower pace of 0.3% vs. expectations of 0.4%. In June, Retail Sales expanded nominally by 0.1%.

Retail Sales excluding automobiles expanded strongly by a full one percent, doubling expectations of 0.5%. The economic data was contracted by 0.7% in June. Scrutiny of the Retail Sales report shows that demand for automobiles remained weak. Households postponed demand for automobiles to avoid higher interest obligations.

The Canadian Dollar remains strong as the oil price is preparing for a fresh upside above the immediate resistance of $91.00. More upside in the oil price is anticipated due to deepening supply concerns and expectations of an end to the global rate-hike cycle. It is worth noting that Canada is the leading exporter of oil to the United States and higher oil prices support the Canadian Dollar.

This week, Canada’s inflation data for August remained mixed. Headline Consumer Price Index (CPI) expanded at a higher pace of 0.4% vs. expectations of 0.2% due to rising energy prices. The Bank of Canada (BoC) takes core inflation into account for the monetary policy framework, therefore, the impact of the recovery in gasoline prices would be limited.

Meanwhile, the US Dollar struggles to find a direction as investors remain mixed about whether the Federal Reserve (Fed) will keep interest rates unchanged in the remainder year or will hike one more time. As per the CME Fedwatch tool, traders see a 71% chance for interest rates remaining steady at 5.25%-5.50% in the November monetary policy meeting.

• DXY advances further and clinches new multi-month tops.
• Extra upside is expected to retest the 2023 top near 105.90.

DXY resumes the uptrend and reaches fresh six-month highs in the 105.75/80 band at the end of the week.

The continuation of the upside momentum in the index is expected to challenge the 2023 top at 105.88 (March 8) sooner rather than later. The surpass of this level could put a move to the round level at 106.00 rapidly back on the radar.

While above the key 200-day SMA, today at 103.04, the outlook for the index is expected to remain constructive.

DXY daily chart

The Bank of Japan left the policy settings unchanged. The Yen has weakened following the decision. Economists at TD Securities analyze USD/JPY outlook.

Bboring BoJ meeting with no fireworks

• Retail Sales in Canada at a modest pace in July.
• USD/CAD stays in negative territory below 1.3450 after the data release.

Retail Sales in Canada rose 0.3% on a monthly basis in July, Statistics Canada reported on Friday. This reading came in slightly below the market expectation for an increase of 0.4% and followed the 0.7% decrease (revised from 0.8%) recorded in June.

Retail Sales ex-Autos grew 1% in the same period, surpassing analysts' estimate of 0.5%.

Market reaction

USD/CAD pair stays under modest bearish pressure after this report and was last seen losing 0.4% on a daily basis at 1.3430.

• USD/CHF consolidates around 0.9050 amid uncertainty over the Fed’s interest rate peak.
• The SNB kept interest rates unchanged at 1.75% for the first time since March 2022.
• Going forward, investors will focus on US S&P Global PMIs for September.

The USD/CHF pair traded in a narrow range near 0.9050 in the late European session. The Swiss Franc asset has remained in the grip of bulls broadly as the Swiss National Bank (SNB) announced a steady interest rate decision on Thursday, keeping interest rates at 1.7% while investors anticipated an interest rate increase by 25 basis points (bps) to 2%.

SNB Chairman Thomas J. Jordan and other policymakers decided to deliver a steady monetary policy for the first time since March 2022 when the central bank initiated its rate-tightening cycle to cool down inflationary pressures.

About the interest rate outlook, the SNB left doors open for further policy tightening. SNB Jordan cited that the current inflation situation has bought us time to assess whether measures taken to date are sufficient to keep inflation comfortably below 2%.

Meanwhile, S&P500 futures generated some decent gains in the London session, portraying nominal improvement in appeal for risk-perceived assets. The US Dollar Index (DXY) demonstrates a sideways trend as uncertainty about the interest rate peak elevated after the Federal Reserve’s (Fed) hawkish outlook.

The upside in the USD Index seems restricted for now as investors see no signs of a hike by the Fed in its November monetary policy. Going forward, investors will focus on preliminary PMIs for September from the S&P Global, which will be published at 13:45 GMT.

According to a preliminary report, The Manufacturing PMI is seen improving marginally to 48.0 from the August reading of 47.9. The Services PMI, which tracks a sector that accounts for two-thirds of the US economy, is anticipated to rise to 50.6 from 50.5 in August.

GBP weakness extends. Economists at Scotiabank analyze Cable’s outlook.

More downside risk for Sterling

New cycle lows for the GBP and strongly aligned bear signals on the short, medium and long-term trend strength oscillator imply more downside risk for Sterling. 

Resistance is 1.2350.

See: 

• Prospects for Sterling remain subdued – Commerzbank

• If EUR/USD trades down to 1.05, GBP/USD could be trading near 1.21 – ING

• The Pound is still vulnerable to further near-term weakness – MUFG

The USD remains firm. Economists at Scotiabank analyze Greenback’s outlook.

The high for longer narrative is USD supportive

Loonie resists US Dollar’s advance. Economists at Scotiabank analyze the USD/CAD technical outlook.

The 1.3375/1.3395 area remains firm support

• The US Dollar trades mixed on Friday with some profit taking after another ferocious week.
• The focal point to end the week will be the PMI numbers for the US. 
• The US Dollar Index resides near new six-month high 

The US Dollar (USD) had another strong day on Thursday, booking gains against nearly every major G20 currency. Backed by higher US yields, the Greenback  advances in an environment where the rate differential seems to be the driving factor to determine which currency weakens and which appreciates. With the US 10-year yield hitting 4.51%, breaking above the high of October 2007, it looks like King Dollar is affirming its earned title.

There might be some tempering to this party depending on the US Purchasing Managers Index (PMI) data  released by S&P Global later Friday. The data will provide fresh insight on the state of the country’s key manufacturing and services in September, after August data showed that  manufacturing activity dropped into contraction and services recorded a very mild expansion.. Should both numbers fall fully into contraction, expect to see some unwinds from those US Dollar long positions toward the weekend. 

Daily digest: US Dollar seeks confirmation from PMIs

• Strikes are continuing in the major three car procedures with no positive headlines to report ahead of this Friday’s deadline. 
• No breakthrough to report neither on the looming US Government shutdown. 
• Traders will be on edge near 13:45 GMT for the S&P Global Purchasing Managers Index (PMI) numbers: the Manufacturing PMI is expected to head from 47.9 to 48, while the Services PMI is anticipated to edge up from 50.5 to 50.6. The Composite PMI, which tracks performance of both manufacturing and services, is also seen little changed around the previous 50.2 reading. 
• Baker Hughes US Oil Rig Count data will come at 17:00 GMT. Previous number was 515. Energy remains a weak spot in the inflation bag that the Fed can not control in order to get inflation back to 2%. With the Baker Hughes Rig Count numbers remaining very low in the past few months, an energy deficit could linger in the US during the winter, pushing energy prices further up. 
• Big dispersion in the equity markets: Japanese Nikkei and Topix reside in the red, down 0.50%. In China, both the Hang Seng and the CSI 300 indexes are up over 1.50%. In Europe, equities are opening flat while US futures are pointing to the green . 
• The CME Group FedWatch Tool shows that markets are pricing in a 73.8% chance that the Federal Reserve will keep interest rates unchanged at its meeting in November. The last rate hike is expected for either December or January.
• The benchmark 10-year US Treasury yield traded at one point at 4.51%, the highest level since October 2007. It later fell back to 4.48%. The rate differential story remains the main driver in the forex space. 

US Dollar Index technical analysis: getting tired

The US Dollar looks set to close this week with another positive print in the US Dollar index (DXY). King Dollar has yet again confirmed its status, though there looks to be some fatigue creeping in the price action. This afternoon’s PMI numbers will be crucial to either see a final attempt for a new yearly high or rather a drop back to 105.00 or lower. 

The US Dollar Index (DXY) goes sideways after reaching 105.68 on Thursday. Should the DXY close above the yearly high near 105.88, expect the US Dollar to follow on with more bullish moves in the medium term. US yields will remain crucial to support current levels in the DXY. 

On the downside, the 104.44 level seen on August 25 kept the Index supported on Monday, halting the DXY from selling off any further. Should the uptick that started on September 12 reverse and 104.44 give way, a substantial downturn could take place to 103.04, where the 200-day Simple Moving Average (SMA) comes into play for support. 

EUR/USD losses continue to coalesce around the low 1.06 support zone. Economists at Scotiabank analyze the pair’s outlook.

Support in low 1.06 area remains solid

• EUR/JPY resumes the uptrend and surpasses 158.00.
• Extra gains remain focused on the monthly high around 158.65.

EUR/JPY reverses Thursday’s marked pullback and resumes the upside momentum past the 158.00 hurdle at the end of the week.

In the meantime, the cross remains stuck within the consolidative range and the breakout of it exposes a visit to the so far monthly high of 158.65 (September 13) prior to the 2023 top at 159.76 (August 30), which precedes the key round level at 160.00.

The surpass of the latter should not see any resistance level of note until the 2008 high at 169.96 (July 23).

So far, the longer term positive outlook for the cross appears favoured while above the 200-day SMA, today at 149.09.

EUR/JPY daily chart

Economist Lee Sue Ann at UOB Group assesses the latest GDP figures in New Zealand.

Key Takeaways

• Oil (WTI) goes sideways in the range between $88 to $93.
• The US Dollar consolidates a new six-month high and is set to close a tenth consecutive week in the green.
• Headline decline from Saudi Arabia or Russia guides oil prices in a calmer regime. 

Oil prices are entering a calmer pattern that is more than welcome to the overheated rally in both WTI Crude and Brent oil prices. Traders will want to see the print of the Baker Hughes Rig Count later this Friday if it has bottomed out and a more gradual rise is being noticed with more rigs coming online. Some demand could pick up next week as recent reports show China crude inventories are at their lowest level since June. 

The US Dollar (USD) had another strong day on Thursday, booking gains against nearly every major G20 currency. Backed by higher US yields, the Greenback  advances in an environment where the rate differential seems to be the driving factor to determine which currency weakens and which appreciates. With the US 10-year yield hitting 4.51%, breaking above the high all the way back in October 2007, it looks like King Dollar is affirming its earned title.

Crude Oil (WTI) price trades at $89.46 per barrel, and Brent Oil trades at $92.37 at the time of writing. 

Oil news and market movers

• Onshore Chinese crude inventories are at their lowest level since June. Meanwhile, China hit a record volume of Russian oil imports during August.
• Russia temporarily bans diesel exports, triggering a firm rise in European prices. 
• The US Keystone crude pipeline is coming back online after a few days of outage.
• The weekly Baker Hughes US Oil Rig Count is due this Friday at 17:00 GMT. Previous number last week was at 515 and at 512. A gradual rise would be bearish for oil prices. 

Oil Technical Analysis: Take a breather

Oil prices are entering a bit of a calm path after the very steep and headline-driven moves seen in the past few weeks. At the moment it looks like WTI Crude price will fade ahead of making a new yearly high. A technical floor is identified and would cool down the Relative Strength Index (RSI) and might see crude breaking $93 later this year. 

On the upside, the double top from October andNovember of last year at $93.12 remains the level to beat. Although this looks very much in reach, markets have already priced in a lot of possible supply deficits and a bullish outlook. Should $93.12 be taken out, look for $97.11, the high of August 2022.

On the downside, a new floor is formed near $88 with the high of September 5 and 11 underpinning the current price action. Proof of that already exists with the dip of September 21 that reversed ahead of $88. Should $88 break nonetheless, the peak of August 10 needs to be enough to catch the dip near $84.20. 

WTI US OIL daily chart

The BoE delivered a surprise by leaving their policy rate unchanged at 5.25% at the latest MPC meeting. The BoE’s policy update has reinforced the recent correction lower for the Pound. Economists at MUFG Bank analyze GBP outlook.

BoE stands pat as focus shifting to higher rates for longer

• USD/MXN shifts comfortably above $17.00 as the US Dollar remains resilient.
• The appeal for risk-sensitive currencies remains weak due to the upside risks of a global slowdown.
• Investors await the interest rate decision from the Banxico, which will be announced next week.

The USD/MXN pair has shifted its auction above the crucial resistance of 17.00 on Friday. The asset strengthens as the US Dollar remains firm despite the Federal Reserve (Fed) announcing an unchanged interest rate decision on Wednesday as anticipated by market participants.

S&P500 futures added some gains in the European session, portraying an ease in the risk-off market mood. The broader trend is still opposing the appeal for risk-sensitive currencies due to the upside risks of a global slowdown.

The US Dollar Index (DXY) remains directionless near a six-month high around 105.70 amid uncertainty over the interest rate peak.  Fed policymakers delivered a hawkish interest rate outlook at the Federal Open Market Committee (FOMC) meeting, hinting at one more interest rate increase of 25 basis points (bps), which will push interest rates to 5.50%-5.75%.

Meanwhile, investors will focus on the release of the preliminary S&P Global PMIs for September, which will be released at 13:15 GMT. The Manufacturing PMI is expected to improve marginally to 48.0 from the August reading of 47.9. The Services PMI, which tracks a sector that accounts for two-thirds of the US economy, is anticipated to rise to 50.6 from 50.5 in August.

On the Mexican Peso, investors focus on the interest rate decision from the Bank of Mexico (Banxico), which will be announced next week. The Mexico central bank has maintained interest rates unchanged at 11.25% in the past three monetary policies.

Economists at Société Générale cited strong growth outperformance and progress on inflation containment have helped MXN to eclipse the EM currency complex this year. However, headwinds are accumulating from currently rich valuations, shifts in the Developed Markets rates paradigm, and changes to domestic policies regarding currency intervention.

USD/JPY has risen above 148. Economists at Société Générale analyze the pair’s technical outlook.

Break below 145.90 crucial to affirm a short-term down move

The Yuan (CNY) is increasingly being used for trade, investment and as a reserve currency in Africa. Strong trade trends support more trade settled in CNY, economists at Standard Chartered report.

CNY internationalisation gathers pace

Alvin Liew, Senior Economist at UOB Group, reviews the latest FOMC event.

Key Takeaways

• The oil price sets for further recovery as investors see the global rate-tightening cycle concluding sooner.
• Deepening supply concerns due to supply cuts from Russia and Saudi Arabia have kept oil bulls in the driving seat.
• Investors await global PMI data for further guidance on the oil price.

West Texas Intermediate (WTI), futures on NYMEX, juggle in a narrow range inside Thursday’s trading range of $88.30-91.00. The oil price gathers strength to break above the crucial resistance of $91.00 as investors see an end to the global rate-tightening cycle due to upside risks of slowdown.

Fears of a global slowdown have heightened as global manufacturing and services PMIs have been underperforming. Global banks have downgraded Gross Domestic Product (GDP) projections for the second half of Western economies as firms are struggling to address their lofty interest obligations. Organization for Economic Development (OECD) cuts its global GDP growth rate to 2.7% for 2024 from the previous forecast of 2.9%.

While global central bankers are expected to conclude their historically aggressive rate-tightening spell, risks of a slowdown will remain intact as they have been reiterating on keeping them higher long enough’ till the achievement of price stability.

In addition to that, deepening supply concerns due to the ban on fuel exports from Russia and OPEC’s production cuts have outperformed the hawkish interest rate outlook from the Federal Reserve (Fed). The Fed supported an interest rate peak at 5.75%, which calls for expectations of one more interest rate increase in the remainder year.

Meanwhile, investors will shift focus on preliminary global Manufacturing PMIs, which will start releasing from next week. Bulls could lose grip over the oil price if factory activities continue to remain vulnerable due to a deteriorating demand outlook.

Sterling eased as a result of the BoE decision. Economists at Commerzbank report.

GBP might be able to recover slightly if the inflation outlook were to improve significantly 

• AUD/USD attempts to approach 0.6450 on the back of the Greenback’s retreat.
• The pullback in US bond yields limits the gains of the US Dollar (USD).
• Australia's private sector returned to growth in September; providing minor support to the Aussie pair.

AUD/USD snaps a two-day losing streak, trading higher near 0.6440 during the European session on Friday. The pair is receiving upward support as the US Dollar (USD) retraces a portion of its intraday gains.

The pullback in US Treasury yields might have limited the upside potential of the Greenback. The yield on the 10-year US bond stands at 4.46%. The US Dollar Index (DXY), which measures the performance of the Greenback against six other major currencies, is trading at around 105.60 at the time of this report.

Market participants are likely awaiting economic data releases, including the preliminary United States (US) S&P Global PMIs for September. These datasets may provide valuable insights into the economic conditions and assist traders in identifying potential trading opportunities around the AUD/USD pair.

During the Wednesday meeting, the Federal Reserve (Fed) opted to maintain interest rates within the 5.25-5.50% range. Fed Chairman Jerome Powell, in a subsequent press conference, reiterated the Fed's commitment to achieving a 2% inflation target. Powell also mentioned that the Fed is prepared to raise rates if deemed necessary. The Fed's hawkish stance could exert pressure on the Aussie pair.

On the other side, a survey has indicated that Australia's private sector returned to growth in September after two consecutive months of contraction, providing some support to the AUD/USD pair. The Judo Bank Flash Australia Composite PMI saw an improvement, rising from 48.0 in August to 50.2 in the reported month.

Additionally, the Australian Services PMI reached a four-month high, registering 50.5 for September, up from 47.8 in August. However, the Manufacturing PMI remained in contraction territory, declining to 48.2 from 49.6 in the previous month. This contraction in the manufacturing sector has tempered bullish sentiment around the Australian Dollar (AUD), preventing aggressive bullish bets on the currency.

• Gold price trades sideways as uncertainty about the interest rate outlook persists.
• The Fed kept interest rates unchanged but left doors open for further policy tightening.
• Unlike other G7 economies, the US remains resilient on the grounds of a strong labor market and upbeat consumer spending.

Gold price (XAU/USD) struggles to find a direction as investors remain uncertain about the interest rate peak after the Federal Reserve’s (Fed) monetary policy announcement on Wednesday. The precious metal trades inside Thursday’s range as the upside is restricted due to the US economic resilience, which has been keeping expectations alive over one more interest rate increase from the Fed. On the downside, Gold also looks well supported due to consistently falling core inflation.

While the US economy has remained strong on the grounds of labor demand, wage growth, services sector activity, and consumer spending, the country’s manufacturing sector has remained a major concern. US factory activity has been contracting for a long time,  and further pressure cannot be ruled out as firms aim to control costs through lower inventory backup to avoid higher working capital requirements.

Daily Digest Market Movers: Gold price trades directionless ahead of S&P Global PMIs

• Gold price rebounds to near $1,925.00 as investors see pain in the global economy on expectations that central banks will keep interest rates higher for longer.
• The precious metal attempted a recovery despite resilient US Dollar and Treasury yields as the Federal Reserve (Fed) is expected to keep interest rates unchanged for the remainder of the year.
• As per the CME Fedwatch tool, traders see a 71% chance for interest rates remaining steady at 5.25%-5.50% in the November monetary policy meeting.
• However, Fed policymakers delivered a hawkish interest rate outlook, hinting at one more interest rate increase of 25 basis points (bps), which will push interest rates to 5.50%-5.75%.
• Fed policymakers may continue favoring a steady monetary policy as core inflation is consistently falling and a recent rise in gasoline prices will likely have a limited impact on overall inflationary pressures.
• While higher interest rates from the Fed are easing inflationary pressures, investors shift focus on the economic data, which will set a base for upcoming monetary policy meetings.
• US economic conditions, particularly steady employment and wage growth as well as upbeat consumer spending, may keep excess inflation over the desired rate of 2% extremely stubborn.
• The Bank of America (BofA) is optimistic about the US economic outlook on strong consumer spending momentum, lowering the chances of a recession.
• In the monetary policy announcement on Wednesday, Fed policymakers said that the US economy is withstanding higher borrowing costs.
• Fed policymakers are interested in keeping interest rates sufficiently high for longer to bring inflation down. According to their projections, benchmark rates will stay above 5% next year and end 2025 at almost 4%. Fed members expect inflation to be under control in 2026, but interest rates are expected to be well above pre-pandemic levels.
• US equities could come under pressure as higher interest rates for a longer period could dent economic growth.
• The upside in the US Dollar Index (DXY) remains restricted as investors await the preliminary S&P Global Manufacturing and Services PMIs for September, which will be published at 13:15 GMT.
• The Manufacturing PMI is expected to improve marginally to 48.0 from August’s reading of 47.9. The Services PMI, which tracks a sector that accounts for two-thirds of the US economy, is anticipated to rise to 50.6 from 50.5 in August.
• The US Manufacturing PMI has come in below 50 for many months, signaling that the country’s factory activity has been contracting for a long period as firms are working on achieving efficiency through controlling costs in building inventories. Producers are operating at lower capacity due to a bleak demand outlook.
• The US Dollar may continue to enjoy higher appeal as other G7 economies are facing risks of a slowdown due to an inability to absorb the consequences of restrictive interest rate policy.

Technical Analysis: Gold price consolidates above 200-day EMA

Gold price recovers after a correction to near $1,915.00. The precious metal trades inside Thursday’s range around $1,925.00. The broader trend is sideways amid uncertainty over the interest rate peak. The precious metal is consistently taking support near the 200-day Exponential Moving Average (EMA) at $1,910.00, exposed to further downside as investors are using the pullbacks as selling opportunities.

The Yen has weakened further following the BoJ’s latest policy meeting. Economists at MUFG Bank analyze JPY outlook.

Lack of push back from BoJ leaves JPY vulnerable to further weakness

• Silver continues scaling higher on Friday and rallies to a nearly three-week high.
• A move beyond the 50% Fibo. might have set the stage for a further move up.
• Any corrective decline is more likely to find support near the $23.30 confluence.

Silver builds on the previous day's solid recovery move from the $22.80 area, or the weekly low, and gains strong follow-through traction on Friday. This marks the third successive day of a positive move, also the fifth in the previous six, and lifts the white metal to a two-and-half-week peak, around the $23.75 region during the early part of the European session.

From a technical perspective, a move beyond the 50% Fibonacci retracement level of the August-September downfall could be seen as a fresh trigger for the XAG/USD bulls. Furthermore, oscillators on the daily chart have just started moving in the positive territory and support prospects for a further appreciating move. Hence, a subsequent strength towards reclaiming the $24.00 round figure, which coincides with the 61.8% Fibol level, looks like a distinct possibility.

Some follow-through buying will set the stage for an extension of the recent rally from an ascending trend line extending from the June swing low. The XAG/USD might then accelerate the momentum beyond the $24.30-$24.35 intermediate hurdle, towards the $25.00 psychological mark, or the August monthly swing high. The next relevant hurdle is pegged near the July peak, around the $25.25 region, which if cleared decisively should pave the way for additional gains.

On the flip side, any meaningful corrective slide now seems to find decent support near the $23.30 confluence, comprising the 200-period Simple Moving Average (SMA) on the 4-hour chart and the 38.2% Fibo. The next relevant support is pegged near the $23.00 round figure, below which the XAG/USD could slide back to retest the $22.30 support, or a nearly one-month low touched last Thursday. A convincing break below will shift the bias in favour of bearish traders.

Silver 4-hour chart

Technical levels to watch

The Norges Bank hiked by 25 bps to 4.25%. The Norwegian Krone was unable to benefit notably from Norges Bank’s decision. Economists at Commerzbank analyze NOK outlook.

The end of the rate hike cycle could soon be reached

• UK Manufacturing PMI rose to 44.2 in September, above expectations of 43.0.
• Services PMI in the UK fell to 47.2 in September, a big miss.
• GBP/USD consolidates losses around 1.2250 on mixed UK business PMIs.

The seasonally adjusted S&P Global/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) unexpectedly advanced to 44.2 in September versus the 43.0 expected and, 43.0 - August’s final print.

Meanwhile, the Preliminary UK Services Business Activity Index reached a 32-month low of 47.2 in September, compared with a 49.5 final print for August and the 49.2 expected figure.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: “The disappointing PMI survey results for September mean a recession is looking increasingly likely in the UK.”

“The steep fall in output signaled by the flash PMI data is consistent with GDP contracting at a quarterly rate of over 0.4%, with a broad-based downturn gathering momentum to hint at few hopes of any imminent improvement,” Williamson added.

FX implications

GBP/USD is off the multi-month lows, still shedding 0.35% on the day to trade at 1.2250, as of writing.

FX markets are settling down after a big week of central bank policy announcements. Economists at ING discuss USD outlook.

4.50% on the US 10-year yield could pressure risk assets

• USD/CAD trades sideways ahead of economic data from both economies.
• Upbeat WTI prices provide the support for underpinning the Canadian Dollar (CAD).
• US Dollar (USD) trimmed some intraday gains, which could be attributed to the pullback in US bond yields.

USD/CAD halts a two-day winning streak, trading sideways near 1.3470 during the European session on Friday. The pair experienced downward pressure as the US Dollar (USD) trimmed a part of intraday gains, coupled with the upbeat Crude oil prices.

The pullback in US Treasury yields might have put a ceiling on the gains of the US Dollar (USD). The yield on the 10-year US bond stands at 4.46% at the time of writing.

US Dollar Index (DXY), which measures the performance of the Greenback against the six other major currencies, is trading at around 105.50 by the press time.

West Texas Intermediate (WTI), the crude oil prices trade around $89.90 per barrel at the time of writing. This upward trend is attributed to the deliberate production cutbacks by OPEC+ producers.

These producers are actively reducing the supply of crude oil in the market as part of their efforts to support oil prices and balance the global supply-demand dynamics.

Market participants await economic data releases due on Friday, including the preliminary US S&P Global PMIs for September and Canada's Retail Sales for July. These figures have the potential to provide valuable insights into the economic conditions of both economies and can aid traders in identifying potential trading opportunities around the USD/CAD pair

Fed maintained interest rates within the 5.25-5.50% range during its Wednesday meeting. Fed Chairman Jerome Powell, during a subsequent press conference, reiterated the Fed's commitment to achieving a 2% inflation target. Powell also mentioned that the Fed is prepared to raise rates if deemed necessary. The Fed’s hawkish sentiment could help in underpinning the US Dollar (USD).

• The Euro keeps the offered bias intact against the US Dollar.
• Stocks in Europe kicked off the session in the red.
• EUR/USD deflates to multi-month lows on poor PMIs.
• The USD Index (DXY) resumes the uptrend and retargets 105.70.
• Advanced PMIs will also be in the limelight in the US calendar.
• ECB Vice-President Luis De Guindos speaks later in the session.

The Euro (EUR) maintains the selling bias unchanged against the US Dollar (USD), motivating EUR/USD to post new six-month lows near 1.0600 early on Friday.

The Greenback manages to set aside Thursday’s knee-jerk and resumes the uptrend around the 105.60 region when gauged by the USD Index (DXY). The relentless march north in the Dollar has been reinvigorated in response to the hawkish hold by the Federal Reserve (Fed) on Wednesday and appears further propped up by the firm rally in US yields in the belly and the long end of the curve.

Board members at the European Central Bank (ECB) showed some common ground after leaning to a potential pause in the next meeting despite seeing inflation still running well above the bank’s target.

In the European docket, flash Manufacturing and Services PMIs in Germany surprised to the upside at 39.8 and 49.8, respectively, in September, although they remain well into contraction territory. In the broader eurozone, the advanced Manufacturing PMI came in at 43.4, lower than expected, while the Services PMI stood at a higher-than-anticipated 48.4.

Friday is also PMI-day across the pond. In addition, FOMC Governor Lisa Cook will speak later in the American session. 

Daily digest market movers: Euro drops to new lows near 1.0600

• The EUR loses further ground against the USD.
• US and German yields trade without clear direction on Friday.
• Investors see the Federal Reserve hiking rates by 25 bps before end of 2023.
• The BoJ keeps its policy rate unchanged, as expected.
• BoJ Governor Kazuo Ueda sees inflation picking up pace (at some point far far away).
• Market chatter see potential interest rate cuts by the Fed in Q3 2024.
• Talks of a pause by the ECB continue to pick up pace.
• Intervention fears surround the price action around USD/JPY.

Technical Analysis: Euro remains under pressure near 1.0600

EUR/USD recedes to new lows, although the 1.0600 region appears to be quite a tough nut to crack for Euro bears.

If the EUR/USD breaches its low of 1.0614, there is a chance it could revisit the March 15 low of 1.0516 before reaching the 2023 bottom of 1.0481 seen on January 6.

On the positive side, there is a minor resistance level at the September 12 high of 1.0767, followed by the more significant 200-day Simple Moving Average (SMA) at 1.0828. If the pair manages to break above this level, it could pave the way for a continued recovery towards the temporary 55-day SMA at 1.0905, with the possibility of reaching the August 30 top of 1.0945. Surpassing the latter could bring the psychological level of 1.1000 into focus, followed by the August 10 peak of 1.1064. Beyond that, the pair might retest the July 27 high at 1.1149 and potentially reach the 2023 top at 1.1275 from July 18.

As long as the EUR/USD remains below the 200-day SMA, there is a chance that the pair will continue to face downward pressure.

• EUR/GBP gains some positive traction for the third successive day on Friday.
• The BoE’s surprise rate-hike pause undermines the GBP and lends support.
• The dismal German PMIs hold back bulls from placing fresh bets and cap gains.

The EUR/GBP cross attracts some dip-buying near the 0.8660 region on Friday and sticks to its modest intraday gains through the early part of the European session. Spot prices currently trade around the 0.8680 area, up for the third straight day and fifth in the previous six, albeit lack follow-through and remain below a two-month peak touched on Thursday.

The British Pound's (GBP) relative underperformance could be attributed to the Bank of England's (BoE) surprise pause on Thursday, which, in turn, is seen acting as a tailwind for the EUR/GBP cross. In fact, the UK central bank ended a run of 14 straight interest rate hikes in the wake of the recent deceleration of inflation, signs that the UK labour market is cooling and reviving recession fears. The BoE's Monetary Policy Committee voted 5-4 in favour of maintaining the main policy rate at a 15-year high level of 5.25%.

Adding to this, softer-than-expected UK macro data released today undermines the Sterling and lends additional support to the EUR/GBP cross. The UK Office for National Statistics reported that the headline Retail Sales rebounded and increased by 0.4% in August following the previous month's sharp 1.1% fall. The rise, however, was slightly below the 0.5 % growth anticipated. That said, the European Central Bank's (ECB) dovish rate decision last Thursday keeps a lid on any meaningful appreciating move for the EUR/GBP cross.

The ECB opted to hike rates for the 10th straight time, by 25 bps, taking its main rate to an all-time high level of 4%. The downgrading of CPI and GDP growth forecasts for 2024 and 2025, however, suggested that the 14-month-long policy tightening cycle could have reached its peak already. Furthermore, a private survey showed a continuous decline in German business activity for the third straight month in September and fueled worries about a deep economic contraction, suggesting that further hikes may be off the table for now.

The EUR/GBP cross, meanwhile, reacts little to the rather unimpressive Eurozone PMI prints. Nevertheless, spot prices remain on track to register gains for the third successive week, also marking the fifth week of a positive end in the previous six. Bullish traders, meanwhile, are likely to wait for a sustained strength beyond the 0.8700 round figure, nearing a technically significant 200-day Simple Moving Average (SMA), before placing fresh bets.

Technical levels to watch

• Eurozone Manufacturing PMI declined to 43.4 in September, missing estimates of 44.0.
• Bloc’s Services PMI improved to 48.4 in September vs. 47.7 forecast.
• EUR/USD keeps losses near 1.0650 after German, Eurozone Services PMIs.

The Eurozone manufacturing sector contraction deepened but the services sector saw a mild improvement in September, the official data from the HCOB's latest purchasing managers index survey showed Friday.

The Eurozone Manufacturing Purchasing Managers Index (PMI) edged lower to 43.4 in September, compared with the expectations of 44.0 and above the 43.5 seen in August. The index hit a two-month trough.

The bloc’s Services PMI rose to 48.4 in September from 47.9 in August, touching a two-month high, arriving above the 47.7 consensus.

The HCOB Eurozone PMI Composite improved to 47.1 in September vs. 46.5 anticipated and 46.7 reported in August. The index also recorded a two-month peak.

FX implications

EUR/USD is consolidating losses near 1.0650 after mixed Eurozone PMIs. The spot is down 0.08% on the day, as of writing.

The Riksbank hiked policy rates by 25 bps. Economists at Commerzbank analyze SEK outlook after the Interest Rate Decision.

Riksbank disappoints

UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang see USD/CNH navigating within the 7.2800-7.3400 range in the next few weeks.

Key Quotes

GBP weakened on unchanged BoE policy decision. Economists at ING analyze Sterling’s outlook.

EUR/GBP can now drift in a 0.86-0.87 range into the 2 November BoE meeting

Here is what you need to know on Friday, September 22:

The Japanese Yen struggles to find demand on Friday as markets assess the Bank of Japan's (BoJ) policy announcements. Later in the day, S&P Global will release preliminary September Manufacturing and Services PMI surveys for the Euro area, the UK and the US. Retail Sales Canada and comments from central bank officials will also be watched closely by market participants ahead of the weekend.

US S&P Global PMI Preview: A crucial report in a data-dependent era.

The BoJ left the monetary policy settings unchanged following the September meeting, holding the key rate steady at -0.1% and maintaining the 10-year Japanese government bond yield target at 0%. Speaking on the policy outlook, "we still cannot identify what variable would lead to the achievement of 2% inflation and the end of negative interest rate policy," BoJ Governor Kazuo Ueda said in the post-meeting press conference. He explained that a policy change could only be considered when the achievement of 2% inflation comes in sight. USD/JPY extended its rally after the BoJ event and was last seen trading at its highest level since November 2022 near 148.50.

Bank of Japan leaves interest rate, YCC policy unchanged.

GBP/USD dropped below 1.2300 for the first time since March on Thursday after the Bank of England went against the market expectation for a 25 basis points rate hike and left the interest rate unchanged at 5.25%. Early Friday, the data from the UK revealed that Retail Sales declined 1.4% on a yearly basis in August. The pair stays under bearish pressure early Friday and trades slightly above 1.2250.

The data from Australia showed that the S&P Global Manufacturing PMI declined to 48.2 from 49.6. On a positive note, the Services PMI improved to 50.5 from 47.8, pointing to an expansion in the service sector's business activity. AUD/USD edged slightly higher after these figures and stabilized above 0.6400.

EUR/USD closed virtually unchanged on Thursday and extended its sideways grind near 1.0650 early Friday. The Manufacturing PMI in Germany improved to 39.8 in August and the Services PMI rose to 49.8. Although these readings came in above market expectations, the Euro failed to capitalize on them.

Gold price turned south on Thursday and dropped below $1,920. Early Friday, XAU/USD gathered recovery momentum and rose toward $1,930, supported by the pullback seen in the 10-year US Treasury bond yield.

• USD/JPY retraces the recent losses due to the BoJ’s decision on no-interest rate change.
• BoJ could consider adjusting its ultra-loose monetary policy when reaching a 2% inflation target is within reach.
• Investors await US data to gain valuable insights into the economic conditions in the country.

USD/JPY retraces the losses registered on Thursday on the back of a policy rate decision by the Bank of Japan (BoJ). As widely expected, BoJ maintained its current interest rates at -0.1%. The spot price is trading higher around 148.30 during the early trading hours of the European session on Friday.

BOJ Governor Kazuo Ueda conducted the press conference of the post-September policy meeting on Friday. The BoJ Governor has mentioned that the BOJ could contemplate ending yield curve control and adjusting its negative interest rate policy when they believe that achieving 2% inflation is on the horizon.

The policymaker has emphasized that there is "no change to the way of the policy decision-making process," indicating that the BOJ continues to carefully analyze new data at each monetary policy meeting.

Ueda further stated that they have not yet seen inflation reaching a stable 2% level. He also mentioned that the next monetary policy decision in October will be driven by data, including the government's extension of gasoline subsidies.

The BoJ is prepared to implement further easing measures if deemed necessary. Ueda acknowledged that there is a high degree of uncertainty regarding economic conditions, price trends, as well as currency and financial markets.

Japan’s National Consumer Price Index (YoY) report for August printed a reading of 3.2% compared to the previous rate of 3.3%. While National CPI ex-Fresh Food (YoY) remained consistent at 3.1% against the expected 3.0%.

US Dollar Index (DXY) trades higher around 105.40, and these gains can be attributed in part to the positive performance of US Treasury yields. The yield on the 10-year US bond has improved to 4.49% at the time of writing, the highest level since 2007.

Market participants await monitor economic data releases, including the preliminary US S&P Global PMIs for September. These figures may provide valuable insights into the economic conditions in the United States (US) and can assist traders in identifying potential trading opportunities involving the US Dollar (USD).

Recent economic data from the US, released on Thursday, presented a mixed picture. Initially, it strengthened the Greenback, signaling a resilient labor market. However, it later experienced a correction.

US Initial Jobless Claims for the week ending on September 15 reported a figure of 201,000, representing a decrease from the previous reading of 221,000 and reaching the lowest level since January. This data outperformed expectations, as it was anticipated to be higher at 225,000.

The Philadelphia Fed Manufacturing Survey declined to a reading of 13.5 in September, which fell below expectations. Analysts had expected a decrease of only 0.7 from the previous positive reading of 12.

Regarding Existing Home Sales (MoM), August witnessed a decrease to 4.04 million from the previous figure of 4.07 million. Expectations were for an increase to 4.10 million.

As widely anticipated in the market, the Federal Reserve (Fed) chose to maintain interest rates within the 5.25-5.50% range during its Wednesday meeting. Fed Chairman Jerome Powell, during a subsequent press conference, reiterated the Fed's commitment to achieving a 2% inflation target. Powell also mentioned that the Fed is prepared to raise rates if deemed necessary.

• Germany’s Manufacturing PMI improved to 39.8 in September vs. 39.5  expected.
• Services PMI for the German economy recovered to 49.8 in September vs. 47.2 expected.
• EUR/USD keeps losses below 1.0650 despite upbeat German PMIs.

According to the preliminary business activity report from the HCOB survey, published on Friday, Germany’s manufacturing sector is seeing a gradual recovery in September while the services sector downturn eased.

The HCOB Manufacturing PMI in the Eurozone’s biggest economy came in at 39.8 this month, as against the 39.5 expectations and 39.1 print booked in August. The index hit its highest level in three months.

Meanwhile, Services PMI rose from 47.3 in August to 49.8 in September. The market consensus was for a 47.2 reading. The measure reached a fresh two-month high.

The HCOB Preliminary German Composite Output Index arrived at 46.2 in September vs. 44.8 estimates and August’s 44.6. The gauge recorded a two-month top.

FX implications

EUR/USD is keeping its downbeat momentum intact below 1.0650 on the upbeat German data. The pair is trading 0.13% lower at 1.0645, at the time of writing.

• Pound Sterling struggles to extend recovery as the BoE warns risk of a potential slowdown.
• The UK economy is seen slowing down as firms restrict themselves from adding operating capacity and labor.
• On Thursday, the BoE kept room open for further policy tightening if inflationary pressures remained persistent.

The Pound Sterling (GBP) finds offers while attempting to extend recovery as investors see no change in the current policy divergence between the Federal Reserve and the Bank of England (BoE). The GBP/USD pair looks set to test its six-month low as BoE policymakers have shifted their focus to safeguarding the economy from recession risks.

The UK economy has been through a vulnerable phase as the BoE was consistently raising interest rates so that inflationary pressure above the desired rate could recede. While the BoE still cannot announce a victory over inflation as it is more than three times the desired rate, the UK’s economic outlook has worsened as firms are operating on lower capacity and labor growth has slowed.

Daily Digest Market Movers: Pound Sterling remains weak amid risk-off mood

• Pound Sterling faces selling pressure after a pullback move to near the round-level resistance of 1.2300 as investors expect Fed-BoE policy divergence to become sustained.
• The BoE paused its lengthy policy tightening cycle on Thursday as policymakers shifted their focus to recession risks propelled by worsening economic prospects caused by higher interest rates.
• UK central bank held interest rates steady after raising them 15 times straight since December 2021 to ensure price stability.
• A pause in the rate-tightening spell is going to provide relief to households that were facing trouble in augmenting their installment obligations due to higher interest rates.
• The BoE maintained the status quo after Governor Andrew Bailey, policymakers Broadbent, Dhingra, Pill, and Ramsden voted to hold, while Cunliffe, Greene, Haskel, and Mann wanted to lift the key rate to 5.5%.
• However, the BoE kept room open for further policy tightening if inflationary pressure remains persistent.
• This week, UK inflation for August remained soft despite rising energy prices. Monthly headline inflation expanded at a slower pace of 0.3%, while investors anticipated it accelerating at a pace of 0.7%. In July, the economic data contracted by 0.4%.
• On annual terms, the headline CPI softened to 6.7% vs. July’s reading of 6.8%. The core CPI that excludes volatile food and oil prices softened significantly to 6.2% against the estimates of 6.8% and the 6.9% figure recorded in July.
• After UK inflation data, Chancellor Jeremy Hunt said the soft inflation report indicates that “the plan to deal with inflation is working – plain and simple.” He further added that inflation would be halved to 5.3% by year-end if the authorities stick to their plan.
• BoE policymakers warned that interest rates will remain lofty “long enough” to bring down inflation to target.
• About the economic outlook, the BoE conveyed that Q3 Gross Domestic Product (GDP) now is expected to rise 0.1% (Aug: +0.4%), with underlying growth in H2 2023 likely weaker than forecast in August.
• Meanwhile, the UK’s Office for National Statistics (ONS) has reported slightly weaker Retail Sales for August. On a monthly basis, consumer spending rose by 0.4% vs. expectations of 0.5%. In July, Retail Sales contracted by 1.1%. While the economic data excluding fuel prices matched expectations at 0.6%.
• The market mood remains cautious as the Federal Reserve stressed keeping interest rates sufficiently high for a longer time to ensure price stability.
• The US Dollar Index (DXY) consolidates near a six-month high around 105.70 ahead of the preliminary S&P Global Manufacturing PMI for September, which will be published at 13:45 GMT.
• Despite a pause in the rate-tightening spell by the Fed, the US Dollar is expected to remain resilient as the US economy has absorbed the consequences of higher interest rates in a better manner than other G7 economies.

Technical Analysis: Pound Sterling faces pressure near 1.2300

Pound Sterling finds sellers after a short-lived pullback move close to 1.2300. The Cable is only marginally above the six-month low around 1.2200. The asset has stabilized below all short-to-long-term daily Exponential Moving Averages (EMAs). Momentum oscillators support further weakness in the Cable.

In light of advanced prints from CME Group for natural gas futures markets, open interest rose for the second session in a row on Thursday, now by around 12.2K contracts. On the flip side, volume added to the previous daily drop and shrank by around 64.7K contracts.

Natural Gas faces the next support around $2.50

Natural gas prices dropped for the second consecutive session on Thursday. The daily decline was on the back of increasing open interest, which suggests that further retracement appears in the pipeline with the next support emerging at the monthly low around the $2.50 level per MMBtu (September 7).

Japan’s Chief Cabinet Secretary Hirokazu Matsuno said on Friday, he is “watching movements of forex markets with high sense of urgency.”

Matsuno said that he “expects the BoJ to cooperate closely with the government.”

Related reads

• Japan’s Matsuno: Watching movements of FX markets with high sense of urgency
• USD/JPY seems to have now moved into a consolidative phase – UOB

USD/JPY now seems to face a 146.50-148.50 range in the short-term horizon, comment UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

The Swiss National Bank surprised the market by refraining from raising interest rates further. As a result, the Franc depreciated. Economists at Commerzbank analyze CHF outlook.

Little appreciation potential for EUR/CHF 

Bank of Japan (BOJ) Governor Kazuo Ueda is addressing the post-September policy meeting press conference on Friday, noting that they “could consider ending yield curve control and modify negative interest rate policy when we judge the achievement of 2% inflation is in sight.”

Additional quotes

Market reaction

USD/JPY was last seen trading at 148.36, up 0.53% on the day.

EUR/USD remains under pressure as Dollar strength dominates. Economists at ING analyze the pair’s outlook.

More pain from the PMIs?

See: EUR/USD is heading for a look at parity – SocGen

The Indonesian Rupiah has already fallen by more than 2.6% against the Dollar so far this quarter on the back of high crude Oil prices and a rising Dollar Index. Economists at Société Générale discuss IDR outlook.

BI awaiting Fed pivot

• Natural Gas price attracts some buyers and turns positive around $2.89 on Friday.
• The 50-hour EMA is on the verge of crossing above the 100-hour EMA.
• Relative Strength Index (RSI) stands in bullish territory above 50.
• The key resistance level for XNG/USD is located at $3.00; the critical support level is located at $2.78.

Natural Gas price (XNG/USD) recovers its losses during the early European trading hours on Friday. XNG/USD currently trades near $2.89 per MMBtu, gaining 1.19% for the day. The Energy Information Administration (EIA) revealed on Thursday that the weekly Natural Gas Storage Change for the week ending September 15 increased by 64B from the previous week of 67B.

From a technical perspective, Natural Gas price holds above the 50- and 100-day Exponential Moving Averages (EMAs) on the daily chart. It’s worth noting that the 50-hour EMA is on the verge of crossing above the 100-hour EMA. If a decisive crossover occurs on the daily chart, it would validate a Bull Cross, highlighting the path of least resistance for XNG/USD is to the upside. Meanwhile, the Relative Strength Index (RSI) stands in bullish territory above 50, supporting the buyers for now.

The key resistance level for natural gas is located at $3.00, representing the confluence of the upper boundary of the Bollinger Band, a psychological round mark, and a high of September 20. A break above the latter will see the next barrier at $3.08 (a high of March 3). Further north, the additional upside filter is seen around a high of January 24 at $3.30

On the flip side, the critical support level is located at $2.78. The mentioned level portrays the convergence of 50- and 100-day EMAs. The next contention level will emerge at $2.70 (the lower limit of the Bollinger Band). Any follow-through selling below the latter will see a drop to $2.50 (a low of August 2), and finally at $2.26 (a low of June 12).
 

XNG/USD daily chart

Bank of Japan (BOJ) Governor Kazuo Ueda is addressing the post-September policy meeting press conference on Friday, noting that there is “no change to the way of the policy decision-making process that we scrutinize new data at every monetary policy meeting.”

Additional quotes

Market reaction

In reaction to the above comments, USD/JPY is refreshing intraday highs near 148.35, up 0.51% so far.

NZD/USD continues its gradual recovery. Economists at ANZ Bank analyze Kiwi’s outlook.

At least it is not bad news for the Kiwi

The Bank of England (BoE) held its policy rate steady at 5.25%. The decision represents a loss of interest rate support for the Pound, economists at Wells Fargo report.

Policy rate pause could also be a policy rate peak

Open interest in crude oil futures markets rose by nearly 23K contracts after six consecutive daily pullbacks on Thursday, according to preliminary readings from CME Group. On the other hand, volume went down for the second consecutive session, now by around 240.2K contracts.

WTI re-focuses on the September peak

Thursday’s uptick in prices of WTI was on the back of increasing open interest and allows for the continuation of the rebound to retarget the so far September peak at $92.63 per barrel (September 19).\

In the view of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, AUD/USD is now predicted to trade between 0.6355 and 0.6480 in the next few weeks.

Key Quotes

• Asian markets show a mixed sentiment due to market caution on the Fed’s hawkish tone on the interest rate trajectory.
• The pullback in commodities’ prices puts pressure on Australia’s ASX 200.
• Japan's Nikkei 225 index trimmed the intraday losses after BoJ’s no-interest rate change.

Asian markets exhibit a mixed sentiment with a negative bias as the market is cautious of the US Federal Reserve’s (Fed) hawkish tone on the interest rate trajectory.

The Fed's warning that interest rates will remain elevated for an extended period has contributed to ongoing uncertainty and volatility in regional markets.

At the time of writing, China's SSE Composite Index is up by 0.68% to 3,105, Shenzhen Component Index has risen to 10,083, up by 1.02%, Hong Kong's Hang Seng Index has increased to 17,846, Tokyo's Nikkei 225 has declined to 32,433, down by 0.42%, South Korea's Kospi is down by 0.30% and Taiwan's Weighted Index has improved by 0.21%.

Moreover, downbeat commodities’ prices undermined the mining sector, which contributed to the weakening of Australia’s ASX 200, down by 0.14%.

Japan's Nikkei 225 index retraces the intraday losses following the Bank of Japan's (BoJ) decision to maintain its ultra-dovish monetary policy stance. This decision disappointed investors who were anticipating any potential hawkish signals from the central bank.

India's Nifty 50 index has advanced to 19,761, marking a gain of 0.10%. Nevertheless, there is a sense of caution among investors, which could potentially exert pressure on Indian markets.

This caution stems from the deteriorating diplomatic dispute between India and Canada, which has arisen due to allegations surrounding the killing of a Sikh secessionist leader.

• The index leaves behind Thursday’s downtick and retests 105.50.
• DXY remains on track to close the 10^th straight week of gains.
• Flash Manufacturing and Services PMIs are due later in the session.

The USD Index (DXY), which tracks the greenback vs. a bundle of its main competitors, resumes the uptrend and revisits the mid-105.00s at the end of the week.

USD Index now looks at PMIs

The index resumes the uptrend and sets aside Thursday’s small decline on the back of the resumption of the risk-off sentiment and the continuation of the march north in US yields.

On the latter, it is worth mentioning that yields in the belly and the long end of the curve navigate levels last seen in October 2007 and April 2011, respectively, all against the backdrop of firm market chatter regarding another rate hike by the Fed before the year ends and the start of interest rate cuts not before Q45 2024.

In the US docket, advanced Manufacturing and Services PMIs are due for the month of September ahead of the speech by FOMC Governor Lisa Cook (permanent voter, centrist).

What to look for around USD

The index picks up renewed buying interest and advances to the mid-105.00s, retargeting at the same time Thursday’s fresh peaks near 105.70.

In the meantime, support for the dollar keeps coming from the good health of the US economy, which at the same time appears underpinned by the renewed tighter-for-longer stance narrative from the Federal Reserve.

Key events in the US this week: Flash Manufacturing/Services PMIs (Friday).

Eminent issues on the back boiler: Persevering debate over a soft or hard landing for the US economy. Incipient speculation of rate cuts in early 2024. Geopolitical effervescence vs. Russia and China.

USD Index relevant levels

Now, the index is up 0.12% at 105.50 and a breakout of 105.73 (monthly high September 21) would open the door to 105.88 (2023 high March 8) and finally 106.00 (round level). On the other hand, initial support emerges at 104.42 (weekly low September 11) ahead of 103.04 (200-day SMA) and then 102.93 (weekly low August 30).

• The UK Retail Sales came in at 0.4% MoM in August, missing estimates.
• Core Retail Sales for the UK dropped 1.4% MoM in August.
• GBP/USD tests lows near 1.2270 on dismal UK retail trade data.

The UK Retail Sales jumped 0.4% over the month in August vs. 0.5% expected and -1.1% prior, the latest data published by the Office for National Statistics (ONS) showed on Friday. The Core Retail Sales, stripping the auto motor fuel sales, rose 0.6% MoM vs. 0.6% expected and -1.4% seen in July.

The annual Retail Sales in the United Kingdom declined 1.4% in August versus -1.% expected and July’s 3.1% drop while the Core Retail Sales fell by 1.4% in the reported month versus -1.3% expectations and -3.3% previous. 

Main points (via ONS)

FX implications

GBP/USD is testing daily lows near 1.2270 on the downbeat UK Retail Sales data. The spot was last seen trading at 1.2272, down 0.16% on the day.

• EUR/USD extends its downside around the mid-1.0600s on Friday.
• European Central Bank policymaker said inflation over 2% is costly to the economy and the ECB aims to manage it.
• US interest rate is anticipated to rise one more time this year.
• Market players await the Purchasing Manager Index (PMI) data from the Eurozone and the US.

The EUR/USD pair remains under selling pressure and trades in negative territory for the fourth straight day during the early European session on Friday. The major pair currently trades near 1.0653, losing 0.06% on the day.

European Central Bank (ECB) Chief Economist Phillip Lane said on early Friday that inflation above 2% is costly for the economy and that central banks attempt to control inflation over the medium term. On Thursday, German Bundesbank President Joachim Nagel stated that the inflation rate in the eurozone is not approaching 2% at the desired rate and core inflation remains stubbornly high and is expected to fall only gradually.

ECB is expected to end its hiking cycle and will stay on hold until at least July next year, according to economists in a Reuters poll. It's worth recalling that the ECB raised its key interest rate to a record high of 4% on September 14. This, in turn, might drag the Euro lower against the Greenback.

Across the pond, the Fed decided to hold interest rates unchanged at the 5.25-5.50% range on Wednesday’s meeting, as widely anticipated in the market. According to the Fed's most recent quarterly predictions, the benchmark overnight interest rate may be hiked one more time this year to a peak range of 5.50% to 5.75%, and rates could be significantly tighter through 2024 than previously anticipated. This, in turn, boosts the Greenback and acts as a headwind for the EUR/USD pair.

About the data on Thursday, the US weekly Initial Jobless Claims dropped to 201,000, the lowest level since January. Meanwhile, the Philly Fed declined to -13.5 in September from 12.0 in the previous reading, below the market expectation of -0.7. Existing Home Sales fell to 4.04M MoM in August from the previous reading of 4.07M.

Looking ahead, the Purchasing Manager Index (PMI) will be released from both the Eurozone and the US docket for this Friday. The preliminary Eurozone Composite PMI is expected to drop from 46.7 to 46.5 in September, while the preliminary PMI for the US is expected to rise slightly. Traders will take cues from these figures and find trading opportunities around the EUR/USD pair.

GBP/USD now looks at a potential drop to 1.2200, according to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

CME Group’s flash data for gold futures markets noted traders reduced their open interest positions by more than 4K contracts on Thursday. Volume, instead, increased for the second session in a row, this time by around 6.3K contracts.

Gold: Next resistance emerges at $1950

Gold prices retreated for the third session in a row on Thursday. The downtick was amidst shrinking open interest and is indicative that a deeper pullback seem not favoured for the time being. That said, a. near-term rebound could be in the offing with the immediate target at the weekly high at $1947 per troy ounce (September 20).

EUR/USD is seen sticking to its range bound theme for the time being, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

• GBP/USD remains well within the striking distance of a multi-month low set on Thursday.
• The BoE's surprise pause undermines the GBP and acts as a headwind amid a bullish USD.
• The technical setup favours bears and supports prospects for a further depreciating move.

The GBP/USD pair struggles to capitalize on the previous day's modest recovery from the 1.2235 area, or its lowest level since late March and meets with a fresh supply during the Asian session on Friday. Spot prices currently trade near the 1.2280-1.2275 region, down for the third successive day, and seem vulnerable to decline further.

The British Pound (GBP) continues with its relative underperformance in the wake of the Bank of England's (BoE) surprise decision to leave interest rates unchanged on Thursday. In contrast, the Federal Reserve's (Fed) hawkish outlook, signalling the possibility of at least one more rate hike by the end of this year, assists the US Dollar (USD) to hold steady just below a six-month peak. This, along with a generally softer tone around the equity markets, is seen benefitting the safe-haven Greenback and exerting downward pressure on the GBP/USD pair.

From a technical perspective, the recent steep downfall from the 1.1275 area, or a 17-month high touched in July, has been along a downward-sloping channel. This points to a well-established short-term downtrend and favours bearish traders. Furthermore, oscillators on the daily chart are holding deep in the negative territory and are still far from being in the oversold zone, validating the bearish outlook for the GBP/USD pair. Hence, a slide towards retesting the channel support, around the 1.2235-1.2230 region, looks like a distinct possibility.

Some follow-through selling will confirm a fresh bearish breakdown and drag spot prices further below the 1.2200 round figure, towards the next relevant support near the 1.2170-1.2165 zone. The GBP/USD pair could extend the downfall further towards the 1.2140-1.2135 intermediate support before eventually dropping to the 1.2100 mark.

On the flip side, any recovery above the 1.2300 round figure might now confront a stiff barrier near the overnight swing high, around the 1.2350 region. This is followed by resistance near the 1.2375 zone, which if cleared should allow the GBP/USD pair to reclaim the 1.2400 mark. Any subsequent move up, however, might still be seen as a selling opportunity and remain capped near the 200-day Simple Moving Average (SMA) support breakpoint, now turnd hurdle, near the 1.2435-1.2440 region.

GBP/USD daily chart

Technical levels to watch

• USD/MXN hovers around 17.20 amid the USD demand.
• The hawkish remarks from the Federal Reserve (Fed) boost the US Dollar against the Mexican Peso.
• Mexican Retail Sales came at 0.2% MoM in July from 2.3% in the previous reading.
• Traders await the Mexican Economic Activity, US PMI data due on Friday.

The US Dollar (USD) loses its recovery momentum against the Mexican Peso and edges lower to 17.20 during the Asian trading hours on Friday. The hawkish remarks from the Federal Reserve (Fed) lift the Greenback broadly. Investors shift the attention to the release of US S&P Global/CIPS PMI data for September due later in the American session on Friday.

The Fed decided to hold interest rates unchanged at the 5.25-5.50% range on Wednesday’s meeting, as widely anticipated in the market. Additionally, Fed Chairman Jerome Powell reaffirmed the US central bank’s commitment to achieving a 2% inflation target in a press conference while mentioning that the Fed is ready to raise rates if necessary. This, in turn, lifts the Greenback and acts as a tailwind for the USD/MXN pair.

According to the Fed's most recent quarterly predictions, the benchmark overnight interest rate may be hiked one more time this year to a peak range of 5.50% to 5.75%, and rates could be significantly tighter through 2024 than previously anticipated.

On Thursday, the US weekly Initial Jobless Claims dropped to 201,000, the lowest level since January. Meanwhile, the Philly Fed dropped to -13.5 in September from 12.0 in the previous reading, worse than expected at -0.7. Existing Home Sales fell to 4.04M MoM in August from the previous reading of 4.07M.

On the Mexican Peso front, the Instituto Nacional de Estadistica Geografia e Informatica (INEGI) reported on Thursday that Mexican Retail Sales came at 0.2% MoM in July from 2.3% in the previous reading, as market expected. On an annual basis, the figure rose by 5.1% versus 5.9% prior, above the market consensus of 4.9%.

Looking ahead, market players will take cues from the Mexican Economic Activity data for July ahead of the US PMI data. These figures could give a clear direction to the USD/MXN pair.

• USD/INR drops to a multi-week low on Friday, though lacks follow-through selling.
• Oscillators on the daily chart have just started drifting lower and now favour bears. 
• Any subsequent fall could attract buyers near the 100-day/200-day SMAs confluence.

The USD/INR pair comes under some renewed selling pressure on Friday and touches a nearly three-week low, around the 82.80-82.75 region during the Asian session. Spot prices, however, manage to trim a part of the intraday losses and currently trade just below the 83.00 round figure, still down over 0.20% for the day.

Technical indicators on the daily chart, meanwhile, have just started drifting in the negative territory and support prospects for some meaningful depreciating move. That said, any subsequent decline below the daily trough is likely to find decent support near the 100-day Simple Moving Average (SMA), currently pegged near the 82.45 region. This is closely followed by the 200-day SMA, around the 82.35 zone, which should now act as a key pivotal point for the USD/INR pair.

The latter near the August 24 low, which if broken decisive will be seen as a fresh trigger for bearish traders and prompt aggressive technical selling. Spot prices might then turn vulnerable to accelerate the slide towards the 82.00 mark. The downward trajectory could get extended and eventually drag the USD/INR pair to the July swing low, around the 81.70-81.65 region.

On the flip side, movement above the 83.00-83.05 immediate hurdle now seems to confront resistance near the 82.30 zone ahead of the all-time peak, around the 83.40-83.45 region touched on August 15. A sustained strength beyond will be seen as a fresh trigger for bullish traders and allow the USD/INR pair to conquer the 84.00 round-figure mark.

USD/INR daily chart

Technical levels to watch

• Crude prices extend gains due to constrained production outlook.
• Investors expect the oil prices to rise $100 per barrel range in upcoming months.
• OPEC+ has extended the production cuts of 1.3 million barrels per day through the end of the year 2023.

Western Texas Intermediate (WTI), the US crude oil benchmark extends gains on the second day, trading higher around $90.00 per barrel during the Asian session on Friday.

Crude oil prices are receiving upward support due to a constrained production outlook from Saudi Arabia and Russia. Market analysts are anticipating that prices of black gold will gradually rise into the $100 per barrel range in the upcoming months.

The combined supply cuts of 1.3 million barrels per day from Saudi Arabia and Russia have been extended until the end of the year 2023. Markets believe that this extension will worsen an expected 2 million barrels per day shortfall in global oil supplies.

The US Dollar Index (DXY) is currently trading at around 105.40, and this upward movement can be attributed in part to the positive performance of US Treasury yields. The yield on the 10-year US bond has improved to 4.50% at the time of this writing.

Market participants will likely monitor economic data releases, including the preliminary US S&P Global PMIs for September. These figures offer valuable insights into the economic conditions in the United States (US) and can help traders identify potential trading opportunities involving the US Dollar (USD).

Recent economic data from the US, released on Thursday, presented a mixed picture. Initially, it strengthened the Greenback, signaling a resilient labor market. However, it later experienced a correction.

US Initial Jobless Claims for the week ending on September 15 reported a figure of 201,000, marking a decrease from the previous reading of 221,000 and reaching the lowest level since January. This data was anticipated to be higher at 225,000.

The Philadelphia Fed Manufacturing Survey declined to a reading of 13.5 in September, which was below expectations, as the market had anticipated a decrease of 0.7 from the previous positive reading of 12.

Regarding Existing Home Sales (MoM), August saw a decrease to 4.04 million from the previous figure of 4.07 million. Expectations were for an increase to 4.10 million.

As widely anticipated in the market, the Federal Reserve (Fed) chose to maintain interest rates within the 5.25-5.50% range during its Wednesday meeting. Fed Chairman Jerome Powell, in a subsequent press conference, reiterated the Fed's commitment to achieving a 2% inflation target. The policymaker also mentioned that the Fed is prepared to raise rates if necessary.

• USD/CAD loses traction around 1.3460 on Friday.
• The pair holds below the 50- and 100-hour EMAs; Relative Strength Index (RSI) stands in bearish territory below 50.
• The first resistance level is seen at 1.3480; 1.3455 acts as an initial support level.

The USD/CAD pair snaps its two-day winning streak and edges lower to 1.3460 during the Asian session on Friday. A rebound in oil prices underpins the commodity-linked Loonie as the country is the leading oil exporter to the United States. Market players await the monthly Canadian Retail Sales for July and the US S&P Global/CIPS PMI data due later on Friday’s North American session.

According to the one-hour chart, USD/CAD holds below the 50- and 100-hour Exponential Moving Averages (EMAs), which supports the sellers for the time being. Meanwhile, the Relative Strength Index (RSI) stands below 50, activating the bearish momentum for the USD/CAD pair.

The immediate resistance level for the pair is seen near the 100-hour EMA at 1.3480. The additional upside filter to watch is near the confluence of the the upper boundary of the Bollinger Band and a high of September 21 at the 1.3515-1.3525 region. Any follow-through buying above the latter will pave the way to a high of September 13 at 1.3586, followed by a psychological round figure at 1.3600.

On the flip side, a break below the lower limit of Bollinger Band of 1.3455 will see a drop to a key contention at 1.3400. The mentioned level represents a psychological figure and a low of August 11. Further south, the next downside stop will emerge at 1.3380 (a low of September 19).

USD/CAD one-hour chart

• Gold gains some positive traction on Friday and snaps a three-day losing streak to the weekly low.
• The Fed's hawkish outlook continues to underpin the USD and should cap any meaningful upside.
• Traders now look forward to the flash global PMIs and the broader risk sentiment for some impetus.

Gold price builds on the previous day's bounce from the $1,914-$1,913 area, or the weekly low and gains some positive traction during the Asian session on Friday. The XAU/USD currently trades around the $1,925 region, up just over 0.20% for the day, and for now, seems to have snapped a three-day losing streak.

The intraday uptick in the Gold price, meanwhile, lacks any obvious fundamental catalyst and runs the risk of fizzling out rather quickly in the wake of the Federal Reserve's (Fed) readiness to hike interest rates until inflation returns to its 2% target. In fact, the Fed warned that warned that still-sticky inflation in the United States (US) was likely to attract at least one more 25 basis points (bps) lift-off by the year-end.

Moreover, the so-called 'dot-plot' indicated that policymakers see the benchmark rate at 5.1% in 2024, suggesting just two rate cuts next year as compared to four projected previously. Adding to this, the US Labor Department reported on Thursday that the number of Americans filing new claims for unemployment-related benefits dropped to an eight-month low last week, pointing to persistent labour market tightness.

This should allow the Fed to keep rates higher for longer and lead to an extended selloff in the US fixed-income market, pushing the yield on the rate-sensitive two-year government bond to its highest level since July 2006. Moreover, the benchmark 10-year Treasury yield rose to a 16-year peak, which continues to underpin the Greenback and keep a lid on any meaningful appreciating move for the non-yielding Gold price.

Hence, it will be prudent to wait for strong follow-through buying before placing fresh bullish bets around the XAU/USD. Market participants now look forward to the release of the flash PMI prints, which will be looked upon for fresh insight into the health of the global economy. This, in turn, will influence the broader market risk sentiment, which should drive demand for traditional safe-haven assets and the Gold price.

Technical levels to watch

• GBP/JPY gains momentum around 181.85 after the Bank of Japan (BoJ) key event.
• BoJ decided to keep its short-term rate target of -0.1% and its 10-year bond yield target of around 0%.
• The Bank of England (BoE) maintained the benchmark rate at 5.25% on Thursday.
• Market players will monitor the UK Retail Sales, Purchasing Manager Index (PMI) data due later on Friday.

The GBP/JPY cross surges to 181.80 after accelerating the downside momentum to a seven-week low of 180.70 during the Asian session on Friday. The rebound of the cross is bolstered by the Bank of Japan (BoJ) interest rate decision after central bank policymakers decided to maintain the current monetary policy unchanged.

After the highly-anticipated September monetary policy meeting, the Bank of Japan (BoJ) board members decided to keep its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%, as widely expected by the market. However, a divergence in monetary policy between the BoJ and the Bank of England (BoE) weighs on the Japanese Yen (JPY) and acts as a tailwind for the GBP/JPY cross.

Earlier on Friday, Japan’s National Consumer Price Index (CPI) for August came in at 3.2% YoY from 3.3% in July. Additionally, the National CPI ex Fresh Food improved from 3.0% in July to 3.1% in August, whereas the National CPI ex Food, Energy came in at 4.3% compared to 4.3% in previous readings.

The Bank of England (BoE) stunned market participants on Thursday by maintaining the benchmark rate at 5.25% rather than raising it by 25 basis points (bps) to 5.5% as anticipated. British central bank decided to pause its long run of interest rate hikes as the economy slowed and inflation decreased, but BoE Governor Andrew Bailey underlined that the central bank did not believe its work was over. He added that he would not forecast the BoE's next action, but that it would be "very, very premature" to cut interest rates.

Moving on, the UK Retail Sales and Purchasing Manager Index (PMI) data will be released on Friday. The monthly Retail Sales for August are expected to improve from -1.2% to 0.5%, while Composite PMI is expected to rise from 48.6 to 48.7. Traders will take cues from these figures and find trading opportunities around the GBP/JPY cross.

• EUR/JPY trades higher as BoJ maintained its current interest rates at -0.1%.
• Japan's Finance Minister Shunichi Suzuki stressed that they are not ruling out any options to address excessive foreign exchange volatility.
• ECB Chief Economist Phillip Lane emphasized tightening monetary policy through adjustments to interest rates.

EUR/JPY attempts to recover from the previous day’s losses after the interest rate decision by the Bank of Japan (BoJ). As widely expected, BoJ maintained its current interest rates at -0.1%. The spot price is trading higher around 157.60 during the Asian session on Friday.

As the Japanese Yen (JPY) faced renewed selling pressure earlier in the day, Japan's Finance Minister Shunichi Suzuki responded with typical verbal intervention. Suzuki stated that he has no comment on recent foreign exchange (FX) levels and movements.

Suzuki also noted that the FX intervention conducted last year had its intended impact, and the central bank is closely monitoring FX movements with a high degree of urgency.

Furthermore, the policymaker emphasized that they are not ruling out any options for responding to excessive FX volatility and are in close communication with foreign currency authorities overseas.

Japan’s National Consumer Price Index (YoY) for August grew to 3.2% slightly lower than the previous rate of 3.3%. While National CPI ex-Fresh Food (YoY) remained consistent at 3.1% against the expected 3.0%.

On the European Central Bank (ECB) front, Chief Economist Phillip Lane stated early on Friday that "inflation over 2% is costly for the economy." Lane emphasized that central banks aim to achieve inflation targets in the medium term and refrained from speculating on future ECB policy decisions. The policymaker also pointed out that the most effective way to tighten monetary policy is through adjustments to interest rates.

Investors will also likely observe preliminary HCOB PMIs from the Eurozone for September, seeking more valuable insights into the bloc’s economic activities.

• USD/JPY attracts fresh buying on Friday and maintains its bid tone after the BoJ policy decision.
• The Japanese central bank left monetary policy setting unchanged and offered no forward guidance.
• The Fed's hawkish outlook continues to underpin the USD and remains supportive of the move up.

The USD/JPY pair regains positive traction during the Asian session on Friday and the buying interest picks up pace after the Bank of Japan (BoJ) announced its policy decision. Spot prices climb back above the 148.00 mark in the last hour and remain well within the striking distance of the YTD peak touched on Thursday.

The Japanese central bank, as was widely anticipated, decided to leave its monetary policy settings unchanged and fell short of offering any forward guidance. This marks a big divergence in comparison to the Federal Reserve's (Fed) hawkish outlook, which continues to underpin the US Dollar (USD) and acts as a tailwind for the USD/JPY pair. The Fed signalled the possibility of at least one more rate hike by the end of this year and the updated projections show significantly tighter rates through 2024 than previously expected.

This, along with an unexpected drop in the US Weekly Jobless Claims, pushes the yield on the rate-sensitive two-year US government bond to a fresh 17-year peak. Moreover, the 10-year US Treasury yield climbs to the highest since November 2007 and continues to underpin the Greenback. That said, the possibility of the Japanese government intervening in foreign exchange markets might hold back bullish traders from placing fresh bets around the USD/JPY pair.

In fact, the government's top spokesperson issued a fresh warning against the recent JPY weakness and said on Thursday that Japan will not rule out any options in addressing excess volatility in currency markets. Investors might also prefer to wait on the sidelines and look to BoJ Governor Kazuo Ueda's comments for a possible shift in the dovish stance.

Technical levels to watch

• AUD/USD lacks any firm intraday direction and oscillates in a narrow trading band on Friday.
• Business activity in Australia's private sector returns to growth in September and lends support.
• The Fed's hawkish outlook continues to underpin the USD and keeps a lid on any further gains.

The AUD/USD pair struggles to build on the previous day's bounce from the 0.6385 region, or over a one-week low, and seesaws between tepid gains/minor losses through the Asian session on Friday. Spot prices currently trade just above the 0.6400 mark, though the fundamental backdrop supports prospects for a further near-term depreciating move.

A survey showed that business activity in Australia’s private sector returned to growth in September after two straight months of contraction and offers some support to the AUD/USD pair. The Judo Bank Flash Australia Composite PMI improved from 48.0 in August to 50.2 during the reported month. Adding to this, Australian Services PMI climbed to a four-month high and came in at 50.5 for September, up from 47.8 in August. The Manufacturing PMI, however, remained in contraction territory and declined to 48.2 from 49.6 in the previous month, holding back bulls from placing aggressive bullish bets around the Aussie.

Furthermore, the underlying bullish sentiment surrounding the US Dollar (USD), bolstered by the Federal Reserve's (Fed) hawkish outlook, contributes to keeping a lid on any meaningful upside for the AUD/USD pair. The Fed on Wednesday decided to keep rates unchanged at a 22-year high, between the 5.25%-5.50% range, as expected. In the accompanying policy statement, the Fed signalled the possibility of at least one more rate hike by the end of this year in the wake of sticky inflation. Adding to this, policymakers see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four projected previously.

The outlook, along with an unexpected drop in the US Weekly Jobless Claims, continues to push the US Treasury bond yields higher. In fact, the yield on the rate-sensitive two-year US government bond touches a fresh 17-year peak, while the 10-year US Treasury yield climbs to the highest since November 2007 and continues to underpin the Greenback. Meanwhile, the Fed's higher-for-longer narrative fuels concerns about economic headwinds stemming from rapidly rising borrowing costs. This, in turn, is seen weighing on investors' sentiment, which further benefits the safe-haven buck and undermines the risk-sensitive Australian Dollar.

Traders now look forward to the release of the flash US PMI prints, due later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will influence the USD price dynamics and provide some impetus to the AUD/USD pair. Nevertheless, spot prices seem poised to register modest weekly losses and remain well within the striking distance of the lowest level since November 2022, around the 0.6355 region touched last week.

Technical levels to watch

As the Japanese Yen comes under renewed selling pressure, with the USD/JPY pair re-approaching the 148.00 level, Japan’s Finance Minister Shunichi Suzuki is out with some usual verbal intervention.

Key quotes

Market reaction

At the time of writing, USD/JPY is adding 0.07% on the day to trade at 147.70.

• EUR/USD experiences downward pressure due to improved US Dollar (USD).
• RSI indicates a predominant bearish sentiment in the market.
• The 1.0700 psychological level aligned to the 21-day EMA emerges as the key resistance.

EUR/USD continues the downward trajectory, trading lower around 1.0640 during the Asian session on Friday. The improved US Dollar (USD) exerts downward pressure on the pair, which could be attributed to the upbeat US Treasury yields.

The pair could meet a key support around the six-month low at 1.0616 aligned to the 1.0600 psychological level.

On the upside, the EUR/USD pair could face a challenge around the 1.0700 psychological level, followed by the 21-day Exponential Moving Average (EMA) at 1.0735.

A firm break above the latter could support the Euro buyers to explore the region around the 1.0750 psychological level lined up with the 23.6% Fibonacci retracement at the 1.0772 level.

The Moving Average Convergence Divergence (MACD) line remains below the centerline and aligns closely with the signal line. This setup indicates a state of equilibrium, implying that the momentum in the underlying asset's price is relatively neutral, without a clear bias towards either bullish or bearish sentiment.

However, the momentum observed in the EUR/USD pair suggests a prevailing bearish sentiment in the market, given that the 14-day Relative Strength Index (RSI) continues to stay below the 50 level.

EUR/USD: Daily Chart

European Central Bank (ECB) Chief Economist Phillip Lane said early Friday, “inflation over 2% is costly for the economy.”

Additional quotes

Market reaction

EUR/USD was last seen trading at 1.0640, down 0.15% on the day.

• AUD/JPY remains on the defensive around 94.75 ahead of the BoJ key event.
• Australian Manufacturing PMI dropped to 48.2 from 49.6; Services PMI posted 50.5 in September vs. 47.8 prior.
• Japan’s National Consumer Price Index (CPI) for August came in at 3.2% YoY from 3.3% in July.
• Market players will closely watch the Bank of Japan (BoJ) monetary policy meeting.

The AUD/JPY cross remains under selling pressure and trades in negative territory for the second consecutive day during the early Asian session on Friday. At the press time, the cross is up 0.03% on the day at 94.71.

The latest data on Friday showed that the preliminary S&P Global Australian Services PMI posted 50.5 in September, improved from 47.8 in August. On the other hand, the Manufacturing PMI declined to 48.2 from 49.6 in the previous reading. The Composite Index was also improved from 48.0 to 50.2. The mixed Australian economic data fail to boost the Aussie as investors turn to a cautious mood ahead of the highly-anticipated Bank of Japan (BoJ) interest rate decision.

On the Japanese Yen front, BoJ is widely expected to keep its short-term interest rate target of -0.1% and its 10-year bond yield target of around 0%. The Japanese central bank has previously declared that monetary policy shifts would not be considered until local wage and inflation data meet its projections. Markets are eager to see whether Governor Kazuo Ueda would deliver any fresh signals regarding the timing of a policy move and other tweaks to its Yield Curve Control (YCC) during his post-meeting press conference.

About the data, Japan’s National Consumer Price Index (CPI) for August came in at 3.2% YoY from 3.3% in July. Additionally, the National CPI ex Fresh Food improved from 3.0% in July to 3.1% in August, whereas the National CPI ex Food, Energy came in at 4.3% compared to 4.3% in previous readings.

Market participants will closely watch the Bank of Japan (BoJ) interest rate decision due later on Friday. This event could trigger the volatility in the market and give a clear direction to the AUD/JPY cross.

• USD/CHF regains positive traction on Friday and trades just below a multi-month high.
• The SNB's surprise pause continues to undermine the CHF and lends support to the pair.
• The USD holds steady near a six-month top and supports prospects for additional gains.

The USD/CHF pair attracts some dip-buying during the Asian session on Friday and looks to build on the previous day's breakout momentum beyond the 0.9000 psychological mark. Spot prices currently trade around mid-0.9900s and remain well within the striking distance of the highest level since June 13 touched in the aftermath of the Swiss National Bank's (SNB) unexpected pause on Thursday.

The SNB ended its streak of five consecutive increases and decided to keep its benchmark interest rate unchanged at the end of the quarterly monetary policy meeting as against expectations for a 25 bps lift-off. In the accompanying statement, the SNB noted that the significant tightening of monetary policy over recent quarters is countering remaining inflationary pressure. This comes on top of the recent slew of weak real economy data, and sub-2% readings on the headline and core inflation, which, in turn, weighed heavily on the Swiss Franc (CHF) and provided a goodish boost to the USD/CHF pair.

The US Dollar (USD), on the other hand, holds steady just below a fresh six-month high touched the previous day in the wake of the Federal Reserve's (Fed) hawkish outlook and is seen as another factor acting as a tailwind for the USD/CHF pair. The Fed decided to keep rates unchanged at a 22-year high, between the 5.25%-5.50% range, though warned that sticky inflation was likely to attract at least one more interest rate hike in 2023. Furthermore, the so-called 'dot-lot' indicated that policymakers see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four projected previously.

This reaffirmed market expectations that the US central bank will keep interest rates higher for longer. Furthermore, an unexpected drop in the US Weekly Jobless Claims triggered a fresh round of a sell-off in the US fixed-income market and pushed the yield on the rate-sensitive two-year US government bond to a fresh 17-year peak. The 10-year US Treasury yield also climbed to the highest since November 2007 and continues to underpin the Greenback. That said, a generally weaker tone around the equity markets could benefit the safe-haven CHF and keep a lid on any meaningful intraday move up for the USD/CHF pair.

Nevertheless, the aforementioned fundamental backdrop seems tilted firmly in favour of bullish traders. Moreover, the overnight breakout through a technically significant 200-day Simple Moving Average (SMA) validates the positive outlook and suggests that the path of least resistance for the USD/CHF pair is to the upside. Market participants now look forward to the global flash PMI prints, which might influence the broader risk sentiment and provide some impetus to the major. Spot prices, meanwhile, remain on track to end in the green for the tenth successive week.

Technical levels to watch

On Friday, the People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead at 7.1729, compared with the previous day's fix of 7.1730 and 7.3009 estimated.

• USD/CAD hovers around 1.3480 ahead of economic data from both nations.
• Improved WTI crude prices contribute to underpin the Canadian Dollar (CAD).
• Upbeat US Treasury yields could provide support for the US Dollar (USD).

USD/CAD attempts to snap a two-day winning streak, hovering around 1.3480 during the early trading hours of the Asian session on Friday. The Canadian Dollar (CAD) experienced support as the US Dollar (USD) witnessed correction, coupled with the gains in Crude prices.

West Texas Intermediate (WTI) crude oil is trading around $89.50 per barrel by the press time, as it seeks to build on its recent gains. This uptrend is being driven by the intentional production cutbacks by OPEC+ producers, who are working to reduce the supply of crude oil in the market.

US Dollar Index (DXY) trades higher around 105.40 at the time of writing, which could be partly attributed to the upbeat US Treasury yields. The yield on a 10-year US bond improved to 4.50% by the press time.

Market participants will likely pay close attention to economic data releases, including the preliminary US S&P Global PMIs for September and Canada's Retail Sales for July. These figures can provide valuable insights into the economic conditions of both countries, which could be helpful in finding trading opportunities around the USD/CAD pair.

Economic data from the United States (US) released on Thursday exhibited a mixed performance. Initially, it bolstered the US Dollar and indicated the presence of a resilient labor market. However, it subsequently began to undergo a correction.

US Initial Jobless Claims on the week ending on September 15, reported 201,000 figures, swinging from the previous reading of 221,000, the lowest level since January. The data was expected to release a higher figure of 225,000.

The Philadelphia Fed Manufacturing Survey declined to 13.5 in September against the expected reduction of 0.7 from the positive reading of 12 previously. While Existing Home Sales (MoM) declined in August to a monthly figure of 4.04 million from the 4.07 million priors, which was expected to grow at 4.10 million.

As widely anticipated in the market, the Federal Reserve (Fed) decided to maintain interest rates within the 5.25-5.50% range during its Wednesday meeting.

Fed Chairman Jerome Powell, during a press conference, reiterated the Fed's dedication to achieving a 2% inflation target while also stating that the Fed is prepared to increase rates if deemed necessary. These hawkish comments have bolstered the US Dollar and are acting as a tailwind for the USD/CAD pair.

• NZD/USD attracts some sellers around 0.5925 amid the Fed’s hawkish stance.
• New Zealand's Trade Balance (NZD) dropped to $-2,291M MoM in August versus $-1,107M prior.
• The higher-for-longer rate narrative from the Federal Reserve (Fed) continues to boost the US Dollar (USD).
• Traders will monitor the preliminary US S&P Global/CIPS PMI data.

The NZD/USD pair loses traction after seeing a rejection at 0.5940 during the early Asian session on Friday. The pair currently trades near 0.5925, down 0.10% on the day. The mixed New Zealand Trade Balance data and the upbeat growth number fail to impress the pair as investors digest the outcome of the Federal Reserve (Fed) meeting on Wednesday.

The latest data released by Statistics New Zealand on Friday revealed that the nation’s Trade Balance (NZD) dropped to $-2,291M MoM in August versus $-1,107M prior. The annual trade deficit improved to $15.54B for the said month versus $-15.88B prior figures. Additionally, Exports eased to $4.99B during the said month versus $5.38B prior whereas Imports improved to $7.28B compared to $6.55B in previous readings.

Earlier on Thursday, New Zealand's economy expanded 0.9% during the second quarter, following 0% in the previous reading. Annually, the second-quarter GDP expanded by 1.8%, compared with the 2.2% growth in Q1 while beating estimates of a 1.2% increase. The upbeat GDP figures might startle the Reserve Bank of New Zealand (RBNZ), which has said that slower growth is needed to curb inflation. These figures could lead to rates holding at their highest level in more than 14 years for longer than expected.

On the USD front, the hawkish stance from the Federal Reserve (Fed) continues to boost the US Dollar (USD) across the board. That said, Fed Chairman Jerome Powell reaffirmed the US central bank’s commitment to achieving a 2% inflation target in a press conference while mentioning that the Fed is ready to raise rates if necessary. This, in turn, lifts the Greenback and acts as a headwind for the NZD/USD pair.

About the data, the weekly Initial Jobless Claims dropped to 201K, the lowest level since January. Meanwhile, the Philly Fed dropped to -13.5 in September from 12.0 in the previous reading, worse than expected of -0.7. Existing Home Sales fell to 4.04M MoM in August from the previous reading of 4.07M.

Looking ahead, market players will take cues from the preliminary US S&P Global/CIPS PMI data for September due on Friday. These figures could give a clear direction to the NZD/USD pair.

• GBP/USD remains on the defensive and is pressured by a combination of factors.
• The Fed's hawkish outlook and a weaker risk tone underpin the safe-haven USD.
• The BoE's surprise pause continues to weigh on the GBP and favours bearish traders.

The GBP/USD pair struggles to capitalize on the previous day's modest bounce from the 1.2230 area or a nearly six-month low and oscillates in a narrow trading band during the Asian session on Friday. Spot prices remain below the 1.2300 round-figure mark and seem vulnerable to prolonging a well-established downtrend witnessed over the past two months or so.

The US Dollar (USD) holds steady just below its highest level since June touched on Thursday and continues to draw support from the Federal Reserve's (Fed) hawkish outlook, which, in turn, is seen acting as a headwind for the GBP/USD pair. The Fed decided to keep rates unchanged at a 22-year high, between the 5.25%-5.50% range, as was widely expected, though signalled the possibility of at least one more rate hike by the end of this year in the wake of sticky inflation.

Furthermore, the so-called 'dot-lot' indicated that policymakers see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024 as compared to four projected previously. This, along with an unexpected drop in the US Weekly Jobless Claims, pushed the yield on the rate-sensitive two-year US government bond to a fresh 17-year peak. Moreover, the 10-year US Treasury yield climbs to the highest since November 2007 and underpins the Greenback.

A sharp rise in the US Treasury bond yields, meanwhile, fuels concerns about economic headwinds stemming from rapidly rising borrowing costs and tempers investors' appetite for riskier assets. This leads to a further decline in the equity markets, which is seen as another factor underpinning the safe-haven buck and exerting some pressure on the GBP/USD pair. The British Pound is further weighed down by the Bank of England's (BoE) surprise pause on Thursday.

In fact, the UK central bank decided to leave the benchmark interest rate steady at 5.25%, defying expectations of a 25 bps hike to 5.50% in the wake of the recent deceleration of inflation, signs that the UK labour market is cooling and reviving recession fears. Nevertheless, it was the first time since December 2021 that the BoE did not raise interest rates and also lowered its forecast for economic growth in the July-September period to just 0.1% from the previous projection of 0.4%.

The aforementioned fundamental backdrop seems tilted in favour of bearish traders and suggests that the path of least resistance for the GBP/USD pair is to the downside. Hence, any attempted recovery could be seen as a selling opportunity and remain capped. Traders now look to the release of the flash PMI prints from the UK and the US for some meaningful impetus on the last day of the week. Spot prices, meanwhile, seem poised to end in the red for the third straight week.

Technical levels to watch

• Gold price recovers some lost ground around $1,920 amid the USD demand.
• Hawkish comments from Federal Reserve (Fed) Chair Powell drags gold price lower.
• Investors will closely watch the preliminary US S&P Global/CIPS PMI data.

Gold price (XAU/USD) recovers its recent losses after retreating to a weekly low of $1,913 during the early Asian session on Friday. As of writing, XAU/USD was up 0.08% on the day at $1,921.62.

In a press conference on Wednesday, Federal Reserve (Fed) Chairman Jerome Powell reaffirmed the Fed's commitment to achieving 2% inflation. Powel added that the Fed is prepared to raise interest rates if necessary.

According to the Fed's most recent quarterly predictions, the benchmark overnight interest rate may be raised one more time this year to a peak range of 5.50% to 5.75%, and rates may be substantially tighter through 2024 than previously anticipated.

In addition, the Fed revised its Summary of Projections (SEP), indicating that Fed officials anticipate that interest rates will reach 5.1% by the end of 2024 (up from 4.6% previously). It’s worth noting that rising interest rates raise the opportunity cost of investing in non-yielding assets, implying a negative outlook for precious metals.

About the data, the US weekly Initial Jobless Claims dropping to 201K, the lowest level since January. Additionally, the Philly Fed dropped to -13.5 in September from 12.0 in the previous reading, worse-than-expected of -0.7.  Existing Home Sales fell to 4.04M MoM in August from the previous reading of 4.07M. 

Looking ahead, gold traders will keep an eye on the preliminary US S&P Global/CIPS PMI data for September due later on Friday. These figures could provide a clear direction for gold price.